Audit 361087

Finding No. 2024-026 Federal Awarding Agency: U.S Department of Agriculture (USDA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: Summer 2021 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: DEED’s child nutrition services (CNS) management authorized Summer 2021 P-EBT benefits for ineligible children. Context: The Families First Coronavirus Response Act (P. L. 116-127), as amended by the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L 116-159), the Consolidated Appropriations Act, 2021 (P.L. 116-260), and the American Rescue Plan Act, 2021 (P.L 117-2) authorized a temporary assistance program for households with children without access to meals in school during the public health emergency declared January 27, 2020. The Families First Coronavirus Response Act, Section 1101 required P-EBT benefits to be issued in accordance with the State’s federally approved plan. DEED’s CNS staff and the Department of Health’s Division of Public Assistance developed a joint plan to issue P-EBT benefits to eligible children for the summer of 2021. The plan, approved by USDA in August 2021, required DEED’s CNS staff to determine eligibility for school age children. Pursuant to the approved plan, school children who were eligible to receive free or reduced-price National School Lunch Program meals as of the end of school year 2020–2021 were eligible for Summer 2021 P-EBT benefits. Auditors found DEED’s CNS staff authorized P-EBT benefits totaling $62,816 to 104 ineligible children. This included 46 children enrolled in an ineligible institution and 58 children that were not verified as being eligible at the end of the 2020-2021 school year. Cause: DEED’s CNS management attributed the issuance of unauthorized benefits to human error. Internal controls implemented by DEED management were inadequate to ensure benefits were only authorized for eligible children. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. The Families First Coronavirus Response Act, Pub. L. 116-127, Section 1101 and federal program guidance requires that P-EBT benefits be issued in accordance with the State's approved plan. Alaska’s State Plan for P-EBT Children in School and Child Care, Summer 2021, section 3(f), established the framework for payments to eligible school-aged children. The plan provides that summer P-EBT benefits were to be issued to students identified as eligible for National School Lunch Program meals at the conclusion of school year 2020–2021. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or inaccurate. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding or terminating funding. Questioned Costs: AL 10.542: $62,816 Recommendation: Although the P-EBT program has concluded, if relevant in the future, DEED’s Child Nutrition Programs manager should improve controls to ensure compliance with federal summer free lunch program requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-052 Prior Year Finding: Federal Awarding Agency: 2023-032 U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: School Year 2020–2021, Summer 2021 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: DOH’s DPA did not determine or distribute benefits to school children or children in child care in accordance with the process and timeframes in the federally approved state plan. The audit identified the following deficiencies in FY 24: • The children in child care beneficiaries were not identified as required by the school year 2020–2021 state plan. • The per child benefit amount paid to the 15,697 children in child care was understated by $6.21 and 125 children were included in both the student and the child care benefit eligibility lists. • Issuance records provided by DPA’s Electronic Benefits Transfer (EBT) contractor, Fidelity National Information Services (FIS), were $795,659 more than DPA reported issuances. Furthermore, the FIS report included $28,992 in duplicate summer 2021 benefit issuances to school children. • School year 2020–2021 student beneficiaries paid in FY 24 received benefits at least two years late and the children in child care beneficiaries were paid benefits at least 20 months late. Summer of 2021 beneficiaries paid in FY 24 received benefits at least 20 months late. Context: The Families First Coronavirus Response Act (FFCRA) (P. L. 116-127) authorized a temporary assistance program for households with children without access to meals in school and to certain Supplemental Nutrition Assistance Program (SNAP)-enrolled children in child care during the public health emergency declared January 27, 2020. Under the P-EBT program school children were eligible for benefits if the child would have received free or reduced-price meals at a school through the National School Lunch Program if not for a school’s closure, or reduced attendance or hours, for at least five consecutive days due to the COVID-19 pandemic. Children enrolled in a child care facility were also eligible for the program if the child was a member of a household that received SNAP benefits after October 1, 2020. P-EBT benefits were to be issued in accordance with a federally approved state plan. DPA and the Department of Education and Early Development, Child Nutrition Services (CNS) section, developed joint plans to issue P-EBT benefits to eligible school children and children in child care for the school year 2020–2021 and summer 2021. The school year 2020–2021 plan was approved by USDA in June 2021 and the summer 2021 plan was approved by USDA in August 2021. The approved plans required CNS to determine eligibility for school age children and DPA to determine eligibility for children in child care. CNS staff determined school children eligibility and calculated benefits using operating and enrollment information obtained from school districts. DPA staff determined children in child care eligibility for school year 2020–2021 using data from the Eligibility Information System (EIS). DPA issued children in child care benefits to all SNAP eligible children that were under the age of six at any time between October 2020 and June 2021. All children determined eligible at the end of school year 2020–2021 were deemed eligible for summer 2021 benefits. The school year 2020–21 plan outlined that P-EBT benefits for the period August 2020 through December 2020 were to be issued beginning July 2021 and benefits for the period January 2021 through August 2021 were to be issued beginning in August 2021. Additionally, the plan outlined that benefit issuances to children in child care were to begin September 22, 2021. The summer 2021 plan outlined that benefits to students and children in child care were to be issued in September 2021 and October 2021, respectively. The approved plans also required the State to ensure that children did not receive a child care benefit and a school benefit for the same month. Additionally, the State was to confirm monthly eligibility for SNAP-enrolled children under the age of six living in the area of a school that was closed or operating at reduced attendance. Benefit levels for these children were to be set at the same rate as the average P-EBT benefit for school children in the same area. Furthermore, the State was to identify areas that did not have a school operating at reduced attendance or hours, but were experiencing a reduction in child care access each month using Child and Adult Care Food Program meal claim data provided by CNS. The State was to identify facilities with a 25 percent reduction in meal claims and provide benefits equal to the statewide average P-EBT benefit for school children. DPA was to gather demographic data from the child care facilities to match against SNAP EIS data to identify eligible children. The status of the facilities was to be examined each quarter to determine benefit levels. As noted above, the approved process was not followed and all SNAP-enrolled children under the age of six were determined eligible and received benefits. USDA’s memo approving Alaska’s P-EBT 2020–2021 state plan outlines that any significant impairment in the ability to implement the approved P-EBT plan or substantive changes should be communicated to USDA as soon as possible. No substantive changes regarding the eligibility determination process were communicated by DPA to USDA in FY 24. DPA staff alerted USDA in June 2023 that P-EBT issuances would extend to December 31, 2023. Between July 2023 and April 2024 DPA issued P-EBT benefits (per FIS data) totaling approximately $43.2 million. Cause: DPA management asserted that the children in child care population could not be identified as originally agreed upon under the school year 2020–2021 state plan and that a deviation from the plan was necessary to provide the benefits. The understated benefit amount was due to a calculation error. DPA lacked supervisory review procedures to ensure the accuracy of the benefit calculation and to prevent children from appearing on both student and child care eligibility lists. DPA management and FIS staff could not explain the variance between FIS reported issuance amounts and the amounts reported by DPA staff to USDA. DPA management asserted that benefit issuance delays were attributable to untimely receipt of eligibility data from CNS and system limitations that prevented the division from utilizing EIS to issue benefits. Delayed payments to SNAP-enrolled school children in child care were ascribed to competing priorities and difficulty identifying child care facility closures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. FFCRA, Pub. L. 116-127, Section 1101 and federal program guidance required that P-EBT benefits be issued in accordance with the State's approved plan. Alaska’s State Plan for P-EBT Children in School and Child Care, 2020–2021, section 5, describes how the State will identify eligible children in child care and calculate benefits. Alaska’s State Plan for P-EBT Children in School and Child Care, 2020–2021, section 7, establishes the framework for initial retroactive payment to eligible children from the beginning of the school year to June 2021. The plan outlines that benefits for the period of August 2020 through December 2020 would be issued beginning July 2021 and benefits for January 2021 through June 2021 would be issued beginning August 2021. Alaska’s State Plan for P-EBT Children in School and/or Child care, Summer 2021, section 3 establishes a tentative issuance schedule as September 2021 for school children and October 2021 for children in child care, and USDA encouraged the State to distribute benefits in two or three issuances across the summer of 2021, to the extent practical. Section 3 also outlines the framework for identifying eligible school children and children in child care for summer 2021 P-EBT benefits. USDA Memo, P-EBT Approval of Alaska’s State Plan for Summer 2021, Plan Timetable and Revisions section provides that Alaska will distribute benefits to households consistent with the timeframes identified in the state plan. If any challenges or delays significantly impair the State’s ability to implement the approved plan or require substantive changes to the plan, the State must notify USDA’s Food and Nutrition Services (FNS) regional office as soon as possible. Effect: The delayed P-EBT payment processing reduced access to food benefits. Significant delays in issuing benefits increased the risk that eligibility data had grown stale and intended recipients did not receive the benefits. DPA management’s noncompliance with the federally approved plans may result in the federal awarding agency issuing sanctions or disallowances. Questioned costs were indeterminate due to the unreliability of FIS data. Questioned Costs: AL 10.542: Indeterminate Recommendation: DOH’s commissioner should allocate the resources necessary to ensure effective systems are in place to properly administer federal programs. Views of Responsible Officials: The department partially agrees with the finding. The Division of Public Assistance disagrees with the finding regarding issuance timelines. The division communicated with FNS regarding manual benefit issuance for Alaska expressing timelines would be affected and FNS did not request an updated timeline. Communication with FNS regarding issuance remained consistent, with no indication to alter our issuance plan. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the division consistently communicated with FNS regarding procedural delays affecting the payment timeline and that FNS did not request an updated timeline; however, DPA management could not provide evidence that FNS waived the requirement to submit an updated timeline.

Finding No. 2024-053 Prior Year Finding: 2023-034 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 24 SNAP benefits reported to USDA as issued by the State’s EBT contractor, FIS, was $2,628,951 more than the amount of authorized benefits reported in data from DPA’s EIS. Furthermore, FIS could not provide a reliable audit trail of issuances. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts, to the State’s EBT contractor, FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 24 the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS data or the amounts reported by DPA to USDA. Furthermore, FIS could not provide a detailed list of issuances to support the monthly amounts reconciled by DPA staff and reported to USDA. As a result, the audit could not verify the accuracy and completeness of benefit calculations. Cause: DPA management and FIS staff could not identify the cause of the variances. DPA’s outdated legacy information system and the lack of daily reconciliations (see Finding No. 2024-055) contributed to the deficiencies. Criteria: Title 7 CFR 274.1(h) requires that the State agency create and maintain a master issuance file that consolidates records of all certified SNAP households, record participation activity for each household, and supply all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $2,628,951 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. Views of Responsible Officials: The department agrees with the finding, but not the questioned cost. The Division of Public Assistance performs monthly reconciliations and balancing efforts to ensure accuracy with routine FIS reports, EIS authorization and issuance reports, and federal reporting. However, the division agrees that a new ad hoc report created for this audit by the EBT contractor, FIS, does not match with issuances and reporting. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states the monthly reconciliations of FIS, EIS, and federal reports ensures the accuracy of issuance data; however, DPA management could not provide evidence that eligibility determinations in EIS supported FIS benefit issuances. Furthermore, FIS payment issuance details did not support the summary data used in the monthly reconciliations.

Finding No. 2024-054 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Testing of 42 SNAP recipient cases to verify the completeness and accuracy of benefit calculations found 37 (88 percent) were incorrect or unsupported, including 24 (57 percent) in which the recipients’ application or reports of changes were not processed within federally required timeframes. Testing of 42 SNAP recipient cases to verify the adequacy of case information stored in EIS and DOH’s document management system, ILINX, found 18 (43 percent) had inadequate verifications of required information. Context: The State is required to ensure only eligible households receive supplemental nutrition assistance. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations; automatically cut off households at the end of a certification period unless recertified; and provide the data necessary to meet federal issuance and reconciliation reporting requirements. DPA eligibility technicians (ET) review applications, verify income and resources, and make a determination whether a household is eligible to receive benefits. ETs obtain and upload source documentation into ILINX and manually update EIS with information from source documentation. As part of determining benefit eligibility, the State is required to coordinate the exchange of data with other agencies, such as the federal Social Security Administration, State employment security agency, and current employers, to verify the household’s identity, income, resources, and other eligibility criteria. ET actions taken, verifications performed, and contacts made are recorded using the EIS’s case note screen. Source documentation supporting the eligibility determination is retained in ILINX. To help ensure the accuracy and completeness of EIS information, DPA conducts training and requires supervisors to perform quality control reviews. On November 3, 2023, DOH management submitted a request to FNS to waive federally required interviews and certain verifications of SNAP household eligibility criteria in order to address the ongoing backlog of SNAP cases that built up during the COVID-19 public health emergency. FNS denied the waiver request on November 22, 2023. Disregarding the denial, DOH management informed FNS of the State’s intent to streamline the verification process, whereby ETs, when verifications are not available, authorized SNAP benefits without performing federally required verifications. The EIS legacy system relies on manual processes to adequately support the eligibility and benefit determinations, and ensure the determinations are accurate. Of the 42 SNAP cases tested the following errors were identified, and some cases had multiple errors: • Twenty-two SNAP households’ (52 percent) monthly allotment could not be corroborated by the information in EIS and/or ILINX. • Twenty-four SNAP applications (57 percent) were not processed timely. Fifteen of the 24 were processed 100 or more days after receipt by DPA, including one application that was processed after 295 days. • Nine SNAP applications (21 percent) were certified eligible without an interview at initial application or recertification. Cause: To resolve DPA’s backlog of SNAP applications and recertifications, on December 8, 2023, DOH’s Commissioner directed ETs to process all applications, recertifications and renewals without verifying federally required eligibility information. DPA management informed FNS that the State would reassess these temporary processing procedures after six months or earlier. Furthermore, due to competing priorities, quality control reviews were not consistently performed during FY 24. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all case file information necessary for the eligibility determinations and benefit computations including, but not limited to, all household members’ names, addresses, dates of birth, social security numbers, individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 272.8(a)(1) requires the State maintain and use an income and eligibility verification system to request wage and benefit information from various agencies and use that information to verify eligibility for, and the amount of, SNAP benefits due to eligible households. Title 7 CFR 273.2(f)(1) requires the State to verify certain household income, expenses, and circumstances necessary to determine eligibility prior to certifying a household for SNAP benefits. Title 7 CFR 273.2(f)(6) requires that case files be documented to support eligibility, ineligibility, and benefit level determinations. Documentation shall be in sufficient detail to permit a reviewer to determine the reasonableness and accuracy of the determination. Effect: Inadequate, outdated, or unsupported case file information increases the risk of incorrect or ineligible benefits. Errors in SNAP determinations could result in further sanctions and/or penalties imposed on DOH. Questioned Costs: AL 10.551: $59,073 Recommendation: DOH’s commissioner should allocate the resources necessary to administer SNAP in accordance with federal regulations. DPA’s director should increase staff training and quality control reviews to help ensure procedures are followed for determining SNAP eligibility and retaining required documentation, including the documentation to support compliance with verifications of income through required data exchanges. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-055 Prior Year Finding: 2023-035 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 24. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s U.S. Treasury benefit account and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the U.S. Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 24, required daily reconciliations were not performed. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer’s credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: The lack of daily reconciliations increases the risk of unidentified processing errors and unallowable costs, including potential non-federal liabilities. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-053 Prior Year Finding: 2023-034 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 24 SNAP benefits reported to USDA as issued by the State’s EBT contractor, FIS, was $2,628,951 more than the amount of authorized benefits reported in data from DPA’s EIS. Furthermore, FIS could not provide a reliable audit trail of issuances. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts, to the State’s EBT contractor, FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 24 the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS data or the amounts reported by DPA to USDA. Furthermore, FIS could not provide a detailed list of issuances to support the monthly amounts reconciled by DPA staff and reported to USDA. As a result, the audit could not verify the accuracy and completeness of benefit calculations. Cause: DPA management and FIS staff could not identify the cause of the variances. DPA’s outdated legacy information system and the lack of daily reconciliations (see Finding No. 2024-055) contributed to the deficiencies. Criteria: Title 7 CFR 274.1(h) requires that the State agency create and maintain a master issuance file that consolidates records of all certified SNAP households, record participation activity for each household, and supply all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $2,628,951 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. Views of Responsible Officials: The department agrees with the finding, but not the questioned cost. The Division of Public Assistance performs monthly reconciliations and balancing efforts to ensure accuracy with routine FIS reports, EIS authorization and issuance reports, and federal reporting. However, the division agrees that a new ad hoc report created for this audit by the EBT contractor, FIS, does not match with issuances and reporting. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states the monthly reconciliations of FIS, EIS, and federal reports ensures the accuracy of issuance data; however, DPA management could not provide evidence that eligibility determinations in EIS supported FIS benefit issuances. Furthermore, FIS payment issuance details did not support the summary data used in the monthly reconciliations.

Finding No. 2024-054 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Testing of 42 SNAP recipient cases to verify the completeness and accuracy of benefit calculations found 37 (88 percent) were incorrect or unsupported, including 24 (57 percent) in which the recipients’ application or reports of changes were not processed within federally required timeframes. Testing of 42 SNAP recipient cases to verify the adequacy of case information stored in EIS and DOH’s document management system, ILINX, found 18 (43 percent) had inadequate verifications of required information. Context: The State is required to ensure only eligible households receive supplemental nutrition assistance. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations; automatically cut off households at the end of a certification period unless recertified; and provide the data necessary to meet federal issuance and reconciliation reporting requirements. DPA eligibility technicians (ET) review applications, verify income and resources, and make a determination whether a household is eligible to receive benefits. ETs obtain and upload source documentation into ILINX and manually update EIS with information from source documentation. As part of determining benefit eligibility, the State is required to coordinate the exchange of data with other agencies, such as the federal Social Security Administration, State employment security agency, and current employers, to verify the household’s identity, income, resources, and other eligibility criteria. ET actions taken, verifications performed, and contacts made are recorded using the EIS’s case note screen. Source documentation supporting the eligibility determination is retained in ILINX. To help ensure the accuracy and completeness of EIS information, DPA conducts training and requires supervisors to perform quality control reviews. On November 3, 2023, DOH management submitted a request to FNS to waive federally required interviews and certain verifications of SNAP household eligibility criteria in order to address the ongoing backlog of SNAP cases that built up during the COVID-19 public health emergency. FNS denied the waiver request on November 22, 2023. Disregarding the denial, DOH management informed FNS of the State’s intent to streamline the verification process, whereby ETs, when verifications are not available, authorized SNAP benefits without performing federally required verifications. The EIS legacy system relies on manual processes to adequately support the eligibility and benefit determinations, and ensure the determinations are accurate. Of the 42 SNAP cases tested the following errors were identified, and some cases had multiple errors: • Twenty-two SNAP households’ (52 percent) monthly allotment could not be corroborated by the information in EIS and/or ILINX. • Twenty-four SNAP applications (57 percent) were not processed timely. Fifteen of the 24 were processed 100 or more days after receipt by DPA, including one application that was processed after 295 days. • Nine SNAP applications (21 percent) were certified eligible without an interview at initial application or recertification. Cause: To resolve DPA’s backlog of SNAP applications and recertifications, on December 8, 2023, DOH’s Commissioner directed ETs to process all applications, recertifications and renewals without verifying federally required eligibility information. DPA management informed FNS that the State would reassess these temporary processing procedures after six months or earlier. Furthermore, due to competing priorities, quality control reviews were not consistently performed during FY 24. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all case file information necessary for the eligibility determinations and benefit computations including, but not limited to, all household members’ names, addresses, dates of birth, social security numbers, individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 272.8(a)(1) requires the State maintain and use an income and eligibility verification system to request wage and benefit information from various agencies and use that information to verify eligibility for, and the amount of, SNAP benefits due to eligible households. Title 7 CFR 273.2(f)(1) requires the State to verify certain household income, expenses, and circumstances necessary to determine eligibility prior to certifying a household for SNAP benefits. Title 7 CFR 273.2(f)(6) requires that case files be documented to support eligibility, ineligibility, and benefit level determinations. Documentation shall be in sufficient detail to permit a reviewer to determine the reasonableness and accuracy of the determination. Effect: Inadequate, outdated, or unsupported case file information increases the risk of incorrect or ineligible benefits. Errors in SNAP determinations could result in further sanctions and/or penalties imposed on DOH. Questioned Costs: AL 10.551: $59,073 Recommendation: DOH’s commissioner should allocate the resources necessary to administer SNAP in accordance with federal regulations. DPA’s director should increase staff training and quality control reviews to help ensure procedures are followed for determining SNAP eligibility and retaining required documentation, including the documentation to support compliance with verifications of income through required data exchanges. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-055 Prior Year Finding: 2023-035 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 24. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s U.S. Treasury benefit account and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the U.S. Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 24, required daily reconciliations were not performed. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer’s credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: The lack of daily reconciliations increases the risk of unidentified processing errors and unallowable costs, including potential non-federal liabilities. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-034 Federal Awarding Agency: U.S. Department of Defense (USDOD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 National Guard Military Operations and Maintenance Projects (NGMOMP) Federal Award Number: W91ZRU-20-2-1001, W91ZRU-21-2-1001, W91ZRU-22-2-1001, W91ZRU-23-2-1001, W91ZRU-24-2-1001 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: The State’s accounting system was not updated for changes to the FFY 24 federally certified Facilities Inventory and Support Plan (FISP), which is used to allocate costs to the NGMOMP program. Context: The FISP is USDOD’s federal registry of real property inventory and includes detailed information of all federal/state owned and state operated Army National Guard (ARNG) facilities within the state. All ARNG facilities are owned by, leased for, or licensed to the State. As a result, the State operates and maintains all ARNG facilities. The FISP identifies the level of federal reimbursement authorized for each real property facility through support codes. National Guard Regulations (NGR) Pamphlet 420-10, Chapter 7, provides the support codes with the corresponding federal funding level percentage (i.e. 100 percent, 75 percent, 50 percent, or no support provided). The FISP is annually updated and certified to identify new facilities, changes in funding support, or facilities no longer supported by USDOD. The certified FISP is provided to DMVA management for tracking of ARNG facilities and determining the appropriate funding levels. DMVA management tracks the facilities using location codes in the State’s accounting system. The appropriate federal and State funding level is assigned to each location code. In FY 24 there were expenditures for 139 facility location codes. The audit reviewed all 139 facilities and found 11 (eight percent) had expenditures allocated at a higher federal rate than authorized in the FISP and one of the 11 locations was not listed on the FISP. Cause: DMVA’s procedures were insufficient to ensure the FISP was reviewed annually to identify changes in the facility support codes that require coding changes in the State’s accounting system. DMVA management also applied a higher reimbursement rate based on misinterpretation of multi-use facilities. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.403 requires costs to be necessary, reasonable, and allocable to the federal award, and to conform to any limitations or exclusions in the federal awards as to types or amount of cost items. NGR 5-1 Section 5-4, dated May 28, 2010, states that when there is an identified cost share in an agreement, the grantor shall reimburse the grantee only for the grantor’s percentage share of the total allowable costs. NGR 420-10, Policy and Guidance for ARNG Facilities Program, dated September 2019, states the rate of reimbursement to the State for all authorized charges shall be based on the FISP support codes for the facility generating the expenditure. Effect: Failing to update the State’s accounting system resulted in DMVA management overcharging expenditures to the federal program. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including withholding/terminating funding. Questioned Costs: AL 12.401: $88,984 Recommendation: DMVA’s Division of Administrative Services (DAS) director and the Army Guard Facilities Maintenance director should strengthen procedures to ensure the State’s accounting system is updated annually based on revisions to the certified FISP and ensure the proper codes are used for multi-use facilities. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-035 Federal Awarding Agency: USDOD Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 NGMOMP Federal Award Number: W91ZRU-23-2-1001, W91ZRU-23-2-1004, W91ZRU-23-2-1005, W91ZRU-23-2-1010, W91ZRU-23-2-1021E, W91ZRU-23-2-1021K, W91ZRU-23-2-1040 Applicable Compliance Requirement: Period of Performance Condition: Six of seven award extensions for the NGMOMP program were untimely. Additionally, one award was not closed timely. Context: National Guard Bureau Grants and Cooperative Agreement Policy Letter 21-07, effective date July 19, 2021, revised the program period of performance requirements for extension requests to be submitted no later than 10 days prior to the end of the 120-day award closeout period. Award extension requests were required to be submitted no later than January 21, 2024. Three of the six extension requests were submitted on January 30, 2024 (nine days late); two were submitted on January 25, 2024 (six days late); and one was submitted on January 22, 2024 (one day late). The policy letter also revised the timeframe for award closeout requiring the grantee to conduct closeout within 120 calendar days from the end of the period of performance. Two awards closed during FY 24, of which one did not have a final accounting submitted within the 120 days. Award closeout was submitted approximately 200 days after the end of the period of performance or approximately 80 days late. Cause: DMVA has written procedures for federal extension requests and award closure. However, competing priorities resulted in untimely submission of extension requests. The final reimbursement requests were submitted to USDOD on January 25, 2024, six days before the end of the closeout period. Federal payment was not received until March 19, 2024. Due, in part, to the untimely receipt of the payments, closeout documentation was not signed by all necessary parties until April 13, 2024. Criteria: Per Title 2 CFR 200.308(e)(2) all requests for one-time extension should be submitted at least 10 calendar days before the conclusion of the period of performance. Title 2 CFR 200.344 prescribes the pass-through entity must close out the federal award when it determines that all administrative actions and required work of the federal award have been completed. A recipient must submit all reports and liquidate all financial obligations no later than 120 days after the conclusion of the period of performance. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Untimely award extension requests and award closeouts may result in unallowable program expenditures. Questioned Costs: None Recommendation: DMVA’s DAS director should follow procedures to ensure cooperative award extensions and award closeout documents are submitted timely, including requesting final payments timely, given the extended timeframe for federal reimbursement. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-043 Federal Awarding Agency: United States Department of the Interior (USDOI) Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.605,15.611 Fish and Wildlife Cluster (FWC) Federal Award Number: F22AF02164, F22AF01666 and F22AF01963 Applicable Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Condition: Testing a random sample of 60 FY 24 non-personal service expenditures charged to the FWC identified two expenditures that lacked proper approval, and one that charged unallowable costs to the FWC. Context: DFG’s primary internal control over financial transactions is knowledgeable DFG staff review of invoices or other supporting documentation to ensure the costs are allowable, supported, coded to the correct program, and within the period of performance. This review is demonstrated by the approver’s signature on the invoice or other supporting documentation authorizing payment. In FY 22, the processing of DFG transactions transitioned to the Department of Administration’s (DOA) centralized Shared Services of Alaska (SSoA). DFG submits invoices with coding and approval to SSoA to initiate processing. According to SSoA procedures, a final verification of coding and approval by departmental administrative services staff prior to SSoA processing is optional. The audit tested a random sample of 60 non-personal services expenditure transactions. Auditors identified two transactions that lacked DFG staff signature authorization. In addition, one transaction approved by DFG staff totaling $206.24 was not allowable due to the costs being for advertising a big game hunt permit raffle. Cause: DFG management attributed the errors to changes in the internal control environment, specifically the shift in non-personal service expenditure input and certification in the accounting system from DFG staff to SSoA staff. Furthermore, management noted that this transition weakened the control processes and emphasized that unauthorized payments should not have been processed by SSoA staff. DFG management also cited DFG staff turnover and inadequate training as a contributing factor. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that a state is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Per Title 50 CFR 80.54, ineligible activities include those conducted for the primary purpose of producing income. Per Title 2 CFR 200.421, the only allowable advertising costs are those which are solely for: staff recruitment, goods and services for the performance of a federal award, disposal of materials acquired in the performance of a federal award, and program outreach (such as recruiting project participants) and other specific purposes necessary to meet federal award requirements. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or miscoded. Furthermore, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including adding reporting requirements or withholding/terminating funding. Questioned Costs: ALN 15.611: $206 Recommendation: DFG’s Division of Administrative Service (DAS) director and Division of Wildlife Conservation director should work together to improve training for DFG staff to ensure expenditures charged to FWC are allowable and properly authorized prior to processing by SSoA staff. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-044 Federal Awarding Agency: USDOI Impact: Material Weakness AL Number and Title: 15.605, 15.611 FWC Federal Award Number: Multiple Applicable Compliance Requirement: Equipment and Real Property Management Condition: Auditors could not obtain sufficient and appropriate evidence to verify compliance with FWC’s equipment and real property management requirements. Context: DFG is responsible for ensuring equipment, real property, and capital improvements, acquired with FWC funds, are used for an authorized purpose, sufficiently tracked, and appropriately disposed of in accordance with federal regulations. In FY 24, DFG staff did not maintain sufficient evidence to demonstrate compliance with equipment and real property management requirements. DFG equipment and real property records did not reliably catalog the universe of equipment, real property, and capital improvements funded with FWC grant monies. Equipment records were incomplete and not trackable by funding source in the accounting system. As a result, the audit was unable to determine the extent of equipment purchased with FWC funds. Real property records had not been reconciled since 2019 and could not be matched with DFG site visit logs. The audit could not identify the FWC assets to be monitored and the extent of site visits conducted during the audit period, and whether the site visits included monitoring for authorized uses. Cause: DFG management attributed the deficiencies to a lack of department-wide procedures, staff turnover, and insufficient training. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 2 CFR 200.311 and Title 50 CFR 80.134 requires the State to use real property for the purpose authorized in the grant for as long as it is needed for that purpose. When real property is no longer needed for the originally authorized purpose, property must be disposed of in accordance with federal requirements. Title 2 CFR 200.313 requires the State to use, manage and dispose of equipment acquired under a federal award in accordance with State laws and procedures. Such equipment must be used for the project or program for which it was acquired and for as long as needed. The State agency must maintain equipment property records, perform physical inventory of equipment, develop a control system, and perform regular maintenance of equipment. Title 50 CFR 80.133 requires the State to maintain acquired or completed capital improvements under FWC grants to ensure that each capital improvement continues to serve its authorized purpose during its useful life. Effect: The lack of department-wide procedures increases the risk that FWC funded assets are not used for authorized purposes and properly disposed of when no longer needed. Inadequate equipment tracking increases the risk of loss or theft. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DFG’s commissioner should ensure procedures are developed and training is implemented so that FWC funded equipment, real property and capital improvements are managed in compliance with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-043 Federal Awarding Agency: United States Department of the Interior (USDOI) Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.605,15.611 Fish and Wildlife Cluster (FWC) Federal Award Number: F22AF02164, F22AF01666 and F22AF01963 Applicable Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Condition: Testing a random sample of 60 FY 24 non-personal service expenditures charged to the FWC identified two expenditures that lacked proper approval, and one that charged unallowable costs to the FWC. Context: DFG’s primary internal control over financial transactions is knowledgeable DFG staff review of invoices or other supporting documentation to ensure the costs are allowable, supported, coded to the correct program, and within the period of performance. This review is demonstrated by the approver’s signature on the invoice or other supporting documentation authorizing payment. In FY 22, the processing of DFG transactions transitioned to the Department of Administration’s (DOA) centralized Shared Services of Alaska (SSoA). DFG submits invoices with coding and approval to SSoA to initiate processing. According to SSoA procedures, a final verification of coding and approval by departmental administrative services staff prior to SSoA processing is optional. The audit tested a random sample of 60 non-personal services expenditure transactions. Auditors identified two transactions that lacked DFG staff signature authorization. In addition, one transaction approved by DFG staff totaling $206.24 was not allowable due to the costs being for advertising a big game hunt permit raffle. Cause: DFG management attributed the errors to changes in the internal control environment, specifically the shift in non-personal service expenditure input and certification in the accounting system from DFG staff to SSoA staff. Furthermore, management noted that this transition weakened the control processes and emphasized that unauthorized payments should not have been processed by SSoA staff. DFG management also cited DFG staff turnover and inadequate training as a contributing factor. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that a state is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Per Title 50 CFR 80.54, ineligible activities include those conducted for the primary purpose of producing income. Per Title 2 CFR 200.421, the only allowable advertising costs are those which are solely for: staff recruitment, goods and services for the performance of a federal award, disposal of materials acquired in the performance of a federal award, and program outreach (such as recruiting project participants) and other specific purposes necessary to meet federal award requirements. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or miscoded. Furthermore, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including adding reporting requirements or withholding/terminating funding. Questioned Costs: ALN 15.611: $206 Recommendation: DFG’s Division of Administrative Service (DAS) director and Division of Wildlife Conservation director should work together to improve training for DFG staff to ensure expenditures charged to FWC are allowable and properly authorized prior to processing by SSoA staff. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-044 Federal Awarding Agency: USDOI Impact: Material Weakness AL Number and Title: 15.605, 15.611 FWC Federal Award Number: Multiple Applicable Compliance Requirement: Equipment and Real Property Management Condition: Auditors could not obtain sufficient and appropriate evidence to verify compliance with FWC’s equipment and real property management requirements. Context: DFG is responsible for ensuring equipment, real property, and capital improvements, acquired with FWC funds, are used for an authorized purpose, sufficiently tracked, and appropriately disposed of in accordance with federal regulations. In FY 24, DFG staff did not maintain sufficient evidence to demonstrate compliance with equipment and real property management requirements. DFG equipment and real property records did not reliably catalog the universe of equipment, real property, and capital improvements funded with FWC grant monies. Equipment records were incomplete and not trackable by funding source in the accounting system. As a result, the audit was unable to determine the extent of equipment purchased with FWC funds. Real property records had not been reconciled since 2019 and could not be matched with DFG site visit logs. The audit could not identify the FWC assets to be monitored and the extent of site visits conducted during the audit period, and whether the site visits included monitoring for authorized uses. Cause: DFG management attributed the deficiencies to a lack of department-wide procedures, staff turnover, and insufficient training. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 2 CFR 200.311 and Title 50 CFR 80.134 requires the State to use real property for the purpose authorized in the grant for as long as it is needed for that purpose. When real property is no longer needed for the originally authorized purpose, property must be disposed of in accordance with federal requirements. Title 2 CFR 200.313 requires the State to use, manage and dispose of equipment acquired under a federal award in accordance with State laws and procedures. Such equipment must be used for the project or program for which it was acquired and for as long as needed. The State agency must maintain equipment property records, perform physical inventory of equipment, develop a control system, and perform regular maintenance of equipment. Title 50 CFR 80.133 requires the State to maintain acquired or completed capital improvements under FWC grants to ensure that each capital improvement continues to serve its authorized purpose during its useful life. Effect: The lack of department-wide procedures increases the risk that FWC funded assets are not used for authorized purposes and properly disposed of when no longer needed. Inadequate equipment tracking increases the risk of loss or theft. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DFG’s commissioner should ensure procedures are developed and training is implemented so that FWC funded equipment, real property and capital improvements are managed in compliance with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-003 Federal Awarding Agency: U.S. Department of the Treasury (US Treasury) Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Reporting Condition: OMB staff submitted the quarter ended December 31, 2023, FY 24 SLFRF program project and expenditure report to US Treasury with material errors. Context: The SLFRF program project and expenditure reports are filed quarterly. Key line items include current period and cumulative obligations and expenditures for all projects exceeding $50,000. Under an agreed-upon process between OMB and DOF, OMB staff prepared the quarterly report and the DOF state accountant reviewed, certified, and submitted the report in the US Treasury report portal. The audit found that OMB staff submitted the quarter ending December 31, 2023, report directly to US Treasury without review, certification, and submission by the DOF state accountant. The report overstated five projects current period obligations and four projects current period expenditures by $47,668,558 and $47,375,062, respectively. Cause: Auditors noted OMB lacked written procedures for report preparation, review, and submission. OMB staff turnover at the beginning of FY 24 resulted in a lack of understanding of the agreed-upon process for report submission. According to OMB staff, the quarter ending December 31, 2023, report errors were due to a misunderstanding of changes to the US Treasury reporting portal. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 31 CFR 35.4(c) requires the State to submit periodic reports providing detailed accounting of the use of funds and other information that may be required by the Secretary. Effect: Incorrect reports reduce transparency and may impair decision-making. Questioned Costs: None Recommendation: OMB’s director should develop written procedures that outline the process for preparation, review, certification, and submission of federal reports required under the SLFRF program and work with the federal oversight agency to correct errors as needed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-032 Federal Awarding Agency: U.S. Department of the Treasury Impact: Material Weakness, Material Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Subrecipient Monitoring Condition: During FY 24, DCCED staff did not sufficiently monitor the subrecipient tasked with administering the SLFRF Tourism and Other Businesses program. Furthermore, DCCED management did not take action with respect to the subrecipient’s noncompliance with requirements to obtain a single audit. Context: One of the purposes of the federal SLFRF program was to provide funding to address the negative economic impacts of the pandemic. For this purpose, DCCED entered into a contract with a subrecipient to administer $90 million in grants to tourism and other businesses. The contract required the subrecipient to determine eligibility, send payments to eligible businesses, and provide disbursement reports to DCCED for monitoring. This activity created a subrecipient relationship. The audit determined that DCCED’s monitoring of the subrecipient was insufficient on two grounds. 1. DCCED staff did not perform monitoring activities to verify that the subrecipient was correctly determining eligibility, calculating award amounts, or correctly disbursing funds. DCCED staff reviewed reports and participated in meetings regarding issues raised by the subrecipient or participating businesses. However, DCCED staff did not obtain and review detailed FY 24 disbursement reports, or perform a desk review or onsite visit, to verify the subrecipients compliance with SLFRF program requirements. DCCED staff did not reconcile the total amount of funds DCCED advanced to the subrecipient with the total funds disbursed by the subrecipient. 2. Furthermore, DCCED staff did not ensure that the subrecipient obtained a single or program-specific audit. In FY 22 and FY 23 DCCED advanced a total of $77 million to the subrecipient. The Department of Administration, Division of Finance (DOF) compiles the amount of pass-through funds by subrecipient in order to identify and track subrecipients that must obtain a single audit. DOF sent the subrecipient single audit noncompliance letters for FY 22 and FY 23 and added the subrecipient to the State’s “Delinquent Audits” tracking log, which is posted on DOF’s webpage. However, DCCED staff did not verify the subrecipient’s single audit status and took no action to address the noncompliance. The subrecipient did not obtain a single audit for FY 22 and FY 23. Cause: DCCED lacked resources in its Division of Community and Regional Affairs to administer the SLFRF program. As a result, the program was administered by staff within the Commissioner’s Office that lacked adequate training, knowledge, and experience to administer a federal pass-through program. Consequently, DCCED staff administering the program were not fully aware of federal subrecipient monitoring requirements. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(d) requires pass-through entities to monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with statutes, regulations, and the terms and conditions of the subaward. The amount of monitoring should be commensurate with the subrecipient’s fraud risk and risk of noncompliance. Title 2 CFR 200.332(f) requires pass-through entities to verify that a subrecipient is audited as required by Uniform Guidance Subpart F - Audit. When a subrecipient is noncompliant with the single audit requirement, Title 2 CFR 200.505 states that pass-through entities "must take appropriate action." Authorized action includes withholding payments from the subrecipient or terminating the grant per Title 2 CFR 200.339. Effect: Inadequate subrecipient monitoring increases the risk of subrecipient noncompliance with federal statutes, regulations, and the terms and conditions of a program. Subrecipient noncompliance with the terms and conditions of the federal award could result in the State having to repay SLFRF monies to the federal government. Questioned Costs: None Recommendation: DCCED’s commissioner should ensure compliance with federal subrecipient monitoring requirements through adoption of written procedures and staff training. Furthermore, the commissioner should ensure the SLFRF subrecipient obtains single or program-specific audits for all required fiscal years. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-003 Federal Awarding Agency: U.S. Department of the Treasury (US Treasury) Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Reporting Condition: OMB staff submitted the quarter ended December 31, 2023, FY 24 SLFRF program project and expenditure report to US Treasury with material errors. Context: The SLFRF program project and expenditure reports are filed quarterly. Key line items include current period and cumulative obligations and expenditures for all projects exceeding $50,000. Under an agreed-upon process between OMB and DOF, OMB staff prepared the quarterly report and the DOF state accountant reviewed, certified, and submitted the report in the US Treasury report portal. The audit found that OMB staff submitted the quarter ending December 31, 2023, report directly to US Treasury without review, certification, and submission by the DOF state accountant. The report overstated five projects current period obligations and four projects current period expenditures by $47,668,558 and $47,375,062, respectively. Cause: Auditors noted OMB lacked written procedures for report preparation, review, and submission. OMB staff turnover at the beginning of FY 24 resulted in a lack of understanding of the agreed-upon process for report submission. According to OMB staff, the quarter ending December 31, 2023, report errors were due to a misunderstanding of changes to the US Treasury reporting portal. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 31 CFR 35.4(c) requires the State to submit periodic reports providing detailed accounting of the use of funds and other information that may be required by the Secretary. Effect: Incorrect reports reduce transparency and may impair decision-making. Questioned Costs: None Recommendation: OMB’s director should develop written procedures that outline the process for preparation, review, certification, and submission of federal reports required under the SLFRF program and work with the federal oversight agency to correct errors as needed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-032 Federal Awarding Agency: U.S. Department of the Treasury Impact: Material Weakness, Material Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Subrecipient Monitoring Condition: During FY 24, DCCED staff did not sufficiently monitor the subrecipient tasked with administering the SLFRF Tourism and Other Businesses program. Furthermore, DCCED management did not take action with respect to the subrecipient’s noncompliance with requirements to obtain a single audit. Context: One of the purposes of the federal SLFRF program was to provide funding to address the negative economic impacts of the pandemic. For this purpose, DCCED entered into a contract with a subrecipient to administer $90 million in grants to tourism and other businesses. The contract required the subrecipient to determine eligibility, send payments to eligible businesses, and provide disbursement reports to DCCED for monitoring. This activity created a subrecipient relationship. The audit determined that DCCED’s monitoring of the subrecipient was insufficient on two grounds. 1. DCCED staff did not perform monitoring activities to verify that the subrecipient was correctly determining eligibility, calculating award amounts, or correctly disbursing funds. DCCED staff reviewed reports and participated in meetings regarding issues raised by the subrecipient or participating businesses. However, DCCED staff did not obtain and review detailed FY 24 disbursement reports, or perform a desk review or onsite visit, to verify the subrecipients compliance with SLFRF program requirements. DCCED staff did not reconcile the total amount of funds DCCED advanced to the subrecipient with the total funds disbursed by the subrecipient. 2. Furthermore, DCCED staff did not ensure that the subrecipient obtained a single or program-specific audit. In FY 22 and FY 23 DCCED advanced a total of $77 million to the subrecipient. The Department of Administration, Division of Finance (DOF) compiles the amount of pass-through funds by subrecipient in order to identify and track subrecipients that must obtain a single audit. DOF sent the subrecipient single audit noncompliance letters for FY 22 and FY 23 and added the subrecipient to the State’s “Delinquent Audits” tracking log, which is posted on DOF’s webpage. However, DCCED staff did not verify the subrecipient’s single audit status and took no action to address the noncompliance. The subrecipient did not obtain a single audit for FY 22 and FY 23. Cause: DCCED lacked resources in its Division of Community and Regional Affairs to administer the SLFRF program. As a result, the program was administered by staff within the Commissioner’s Office that lacked adequate training, knowledge, and experience to administer a federal pass-through program. Consequently, DCCED staff administering the program were not fully aware of federal subrecipient monitoring requirements. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(d) requires pass-through entities to monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with statutes, regulations, and the terms and conditions of the subaward. The amount of monitoring should be commensurate with the subrecipient’s fraud risk and risk of noncompliance. Title 2 CFR 200.332(f) requires pass-through entities to verify that a subrecipient is audited as required by Uniform Guidance Subpart F - Audit. When a subrecipient is noncompliant with the single audit requirement, Title 2 CFR 200.505 states that pass-through entities "must take appropriate action." Authorized action includes withholding payments from the subrecipient or terminating the grant per Title 2 CFR 200.339. Effect: Inadequate subrecipient monitoring increases the risk of subrecipient noncompliance with federal statutes, regulations, and the terms and conditions of a program. Subrecipient noncompliance with the terms and conditions of the federal award could result in the State having to repay SLFRF monies to the federal government. Questioned Costs: None Recommendation: DCCED’s commissioner should ensure compliance with federal subrecipient monitoring requirements through adoption of written procedures and staff training. Furthermore, the commissioner should ensure the SLFRF subrecipient obtains single or program-specific audits for all required fiscal years. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-084 Federal Awarding Agency: NASA and USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 43.001, 93.859 RDC Federal Award Number: 80NSSC22K0579, P20GM103395 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: Two of the sampled 40 covered transactions did not have checks for suspension or debarment with the external parties prior to entering the contract. Context: During the testing of suspension and debarment, two grants from the UAF campus had covered transactions, one a subrecipient and another a procurement transaction, that did not have evidence federal excluded parties list system checks were performed prior to entering into the covered transaction. Cause: UAF did not perform timely review of suspension and debarment listings prior to entering into a covered transaction. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Potentially suspended or debarred vendor may have been contracted by the University for a covered transaction. Questioned Costs: None Recommendation: UAF management should perform suspension and debarment checks on all covered transactions paid with federal funds. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-083 Prior Year Finding: Federal Awarding Agency: National Science Foundation Impact: Significant Deficiency AL Number and Title: 47.076 RDC Federal Award Number: 1839290 Applicable Compliance Requirement: Period of Performance Condition: One of 40 sampled transactions were coded incorrectly to the wrong grant. Context: During testing of period of performance, one transaction was observed that appeared to have been liquidated beyond 120 days after the end of the period of performance. Upon further inspection, we concluded that the transaction was coded to the incorrect grant. The correct grant was still within the 120-day liquidation period after the end of the period of performance. Cause: UAF did not perform timely close out procedures on the grant which resulted in incorrectly coded expenditures to go undetected. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: One transaction was incorrectly coded to the wrong grant. Questioned Costs: None Recommendation: UAF management should adhere to their existing requirements for timely grant close out procedures. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-085 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.031 Higher Education Institutional Aid Federal Award Number: P031R210002-23 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: One sample of five grants with level of effort provisions in the grant award notification did not meet the level of effort for key personnel required by the federal agency. Context: During testing of special tests and provisions one grant of a sample of five from UAF was observed to not have met level of effort requirements as stipulated in the award documents. The campus had inadvertently submitted an incorrect budget with different key personnel to the agency and did not correct this with the federal agency upon receipt of the award documents stipulating the incorrect key personnel. Cause: An incorrect budget was submitted with the grant proposal to the Federal agency. Criteria: Per 2 CFR 200.308(f)(3) the Federal Government required a recipient of federal awards must receive prior written approval from the Federal agency for the disengagement of key personnel from a project for more than three months, or a 25% reduction in time and effort devoted to the Federal award. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: Key personnel listed in the award documents did not have time and effort tracked towards the grant project. Questioned Costs: None Recommendation: UAF management should continue to review budgets and key personnel submitted with grant proposals to Federal agencies. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-028 Federal Awarding Agency: U.S. Department of Education Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425 Education Stabilization Fund – COVID-19 Federal Award Number: S425U210020 Applicable Compliance Requirement: Reporting Condition: The Elementary and Secondary School Emergency Relief fund (ESSER) annual report filed by DEED in May 2024 was submitted with incomplete subrecipient expenditure data for key line item 3b.1. Context: ESSER funding is broken out into three different groups: ESSER I, ESSER II and American Rescue Plan (ARP) ESSER. Over 75% of total Education Stabilization Fund expenditures incurred in FY 23 for reporting in FY 24 were grants to subrecipients from ARP ESSER funding. State education agencies are to report on line 3b.1 subaward information, including which agencies received subawards and the funds allocated for and incurred by expenditure category. DEED staff submitted the ARP ESSER amounts awarded to grantees as part of the annual report; however subrecipient expenditure fields were submitted with zeros. Cause: According to DEED management, subrecipients were unresponsive to requests for information and staff assigned to prepare the report had competing priorities and insufficient time. In addition, management reviewed and submitted the report with known errors. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 34 CFR 76.720 requires states to submit reports required for monitoring and continuous improvement and other reports required by the Secretary and approved by the US Office of Management and Budget (OMB). State education agencies are required by the Secretary to submit an annual performance report (OMB No. 1810-0749) with data on subrecipients, state education agencies and subrecipient expenditures, planned expenditures, and uses of funds. Grant Award Notification S425U210020 Attachment T: Grant Conditions: Part A 13. The state education agencies will comply with, and ensure that local education agencies comply with, all reporting requirements at such time and in such manner and containing such information as the Secretary may reasonably require. Effect: Inaccurate federal reporting reduces transparency and may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DEED's Innovation and Education Excellence division director should allocate sufficient staff resources to prepare the ESSER annual report and strengthen report review and approval controls to ensure compliance with annual reporting requirements. Views of Responsible Officials: The department partially disagrees with Finding 2024-028. While it is true that the department did initially report zeros in the LEA portion of ESSER III reporting it is untrue that the effect was a reduction in transparency or impaired the federal agency’s oversight ability. No ESSER annual reporting can be submitted if all entered answers do not conform to implemented data validations requirements. Relevant in this instance is that if district level data reported does not match, to the penny, between different reporting categories, data validation errors occur. Including zeros, when accurate data conforming to data validation checks was not able to be entered, allowed the department to enter the data accurately during the first reporting reopen period. Had the department not entered zeros, data validation errors would have prevented the department from submitting the entire FY2023 ESSER annual report. If no report had been entered as of the initial due date the department would not have been allowed to submit any report at all, which would be less accurate than temporary partial inaccuracy. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for timely and accurate submission of federal reports and should allocate sufficient resources and strengthen controls to ensure compliance with federal reporting requirements.

Finding No. 2024-056 Prior Year Finding: 2023-038 Federal Awarding Agency: United States Department of Health and Human Service (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility Condition: Three of 60 TANF recipient case files tested lacked adequate documentation to indicate that the participant met all eligibility criteria. The following errors were noted: • Two cases exceeded the 60-month benefit limit, which resulted in excess benefits. • One case lacked documentation to verify one parent's relational status to the children. Additionally, seven of 60 cases tested had documentation to support individual's eligibility, but lacked sufficient documentation to verify that the key control over compliance occurred. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. The State reviews applications, identifies income and financial resources, and makes a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, the State’s Income Eligibility and Verification System (IEVS), unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. The State’s TANF manual provides guidance on how to calculate income. Once the information is received, reviewed, and calculated, it is entered into the EIS. EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly. DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of eligibility determinations and not accurately terminating benefit amounts. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 45 CFR 264.1 stipulates that no State may provide assistance to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Effect: Ineligible recipients may have received benefits. Questioned Costs: AL 93.558: $ 5,720 (known questioned costs); $ 173,417 (likely questioned costs) Recommendation: DOH management should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-057 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Insufficient documentation was available to support the manual transfer of time originally coded to another federal program to the TANF program. Context: In a statistically valid sample, two of sixty selections showed time coded to the employee’s time sheet for the Low-Income Home Energy Assistance Program (LIHEAP) that was later manually transferred to TANF. During the audit, a verbal explanation was given that this was done for budgetary reasons, as they are similar activities that can be coded to both LIHEAP and TANF. However, there was insufficient documentation to support that the transferred time was reasonable under the TANF program. Both of the deficient selections were for the same employee. Cause: Inadequate understanding of the documentation needed to support manual adjustments to payroll. Criteria: Per 2 CFR 200.430, costs of compensation are allowable to the extent that they are reasonable for the services rendered and conform to the established written policy of the recipient or subrecipient and meet the standards for documentation of personnel expenses, as outlined in 200.430(g). Effect: Unallowable costs may lead to potential penalties, increased audit scrutiny, distorted indirect cost rates, and the need to repay funds. Questioned Costs: AL 93.558: $1,730 Recommendation: DOH management should improve documentation kept to support manual interference with payroll costs. Views of Responsible Officials: The department does not agree with the finding. The Division of Public Assistance (DPA) met with CLA regarding the questioned costs which were explained and documented. For the sample selected, the employee did positive time keep to LDP U6615 - LIHEAP Policy for their time spent processing heating assistance applications. This was during a time when our Policy section was understaffed, and the administrative section absorbed programmatic duties. The division followed the State of Alaska’s payroll correction process. When IRIS-HRM (payroll) interfaced to IRIS-FIN (financial), the payroll transactions errored due to insufficient program budget. The Department of Administration, Division of Finance provides an erroring payroll transaction report. The departments are instructed to update the report with correct financial coding and send to a BOT email address. The BOT enters the correction in the State’s financial system and attaches the spreadsheet to document the update in coding. Department staff do not have permissions to add notes or additional attachments to the payroll transaction. DPA accounting staff reviewed the errored transaction and identified another allowable fund source to code these expenditures to. Therefore, the payroll expenses were adjusted and charged to the TANF program. Auditor’s Concluding Remarks: Cost transfers must be sufficiently documented in accordance with the provisions of the Office of Management and Budget (“OMB”) as part of 2 CFR Part 200, Subpart E (Uniform Guidance). Under the Uniform Guidance, costs must meet the following conditions: • Be necessary and reasonable for the performance of the award and be allocable to the award; • Be allowable (the cost is allowed by federal regulations, sponsor terms and conditions, including program specific requirements); • Treated consistently (a cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost); • Be adequately documented. The Uniform Guidance also states that any cost allocable to a federal award may not be charged to other federal awards to overcome fund deficiencies, to avoid restrictions imposed by regulations of terms and conditions of the federal award, or for other reasons. The auditor concluded that DPA did not have adequate documentation to support the activities the employee provided to the TANF program were allowable.

Finding No. 2024-058 Prior Year Finding: 2023-039 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: Auditors could not obtain reliable evidence to verify compliance with TANF’s level of effort and earmarking requirements. Context: The State was unable to provide documentation to show how the State was monitoring the level of effort and earmarking requirements throughout the year. This monitoring is normally done as a part of reporting for the program. Cause: Level of effort and earmarking assessment is done through the ACF-204 reporting process. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. The State’s DOH lacked adequate monitoring procedures, primarily due to turnover and staffing shortages. Criteria: Title 45 CFR 263 states that a state must maintain an amount of “qualified state expenditures” for eligible families at least at the applicable percentage of the state’s historic state expenditures. It also states that a state may not spend more than 15 percent for administrative purposes, excluding certain types of expenditures, of the total combined amounts available. Title 45 CFR 264.72 requires a state to spend more than 100 percent of its historic state expenditures for FY 1994 to keep any of the federal contingency funds it received. Title 45 CFR 264.1 states that the average monthly number of families that include an adult head-of-household or a spouse of the head-of-household who has received federal assistance for a total of five years (60 countable months, whether or not consecutive) may not exceed 20 percent of the average monthly number of all families to which the state has provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the state may elect. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Lack of monitoring level of effort and earmarking requirements creates a risk that unallowable benefits were paid. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits. Questioned Costs: None Recommendation: DOH management should develop procedures to ensure that monitoring procedures are in place for level of effort and earmarking. This may include allocating resources to correct the supporting documentation used to monitor these requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-059 Prior Year Finding: 2023-040 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting, Special Tests and Provisions Condition: One of the 60 cases tested had insufficient documentation to verify work hours which resulted in these work activities being reported inaccurately in the ACF-199 report. Context: The State reports the work verification data through the quarterly ACF-199 reports. The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. One of cases tested had insufficient documentation to verify work hours. Case notes referenced a submitted TA-10 form, however the document was unable to be found for audit purposes. All other elements of compliance were supported. Cause: According to DPA management, the division continues to work through the backload associated with the public health emergency and continues to experience staffing shortages. This has adversely affected DPA resources and impacted the ability to meaningfully execute the corrective action plan. Criteria: Per the 2024 Office of Management and Budget (OMB) Compliance Supplement, "the state agency must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of the data used in calculating work participation rates." Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 265.7(a) requires each state’s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems. Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual’s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: The State could be subject to a penalty if reported data is not supported by accurate documentation. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure supporting documentation is complete to support data reported on the ACF-199. This may require increased resources and training. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-060 Prior Year Finding: 2023-042 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting Condition: No Federal Funding and Transparency Act (FFATA) reports were submitted during the audit period of July 1, 2023 through June 30, 2024. Additionally, the State could not provide evidence that the FFY 23 ACF-204 annual report was completed or submitted to the federal agency. Context: FFATA reports related to 13 subrecipients were not filed during the audit period. Payments to subrecipients total $2,951,541.10 in the audit period. The State must complete and file an annual report containing information on the TANF program and the State’s maintenance of effort programs for that year. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. Cause: TANF program management was split between two State departments: DOH and the Department of Community Services (DFCS). Due to the transition, these subrecipients were administered under a reimbursable service agreement and bypassed the necessary flag for reporting. It was unclear which department was responsible for FFATA reporting, resulting in the reports not being filed by either department. DOH experienced staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements for submitting an annual ACF-204 report. Criteria: Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state’s maintenance of effort program(s) for that year. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit reports results in noncompliance with FFATA. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Questioned Costs: None Recommendation: DOH management should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed maintenance of effort expenditures. The State should clearly identify and communicate to the parties responsible for FFATA reporting. The State should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-061 Federal Awarding Agency: USDHHS Impact: Material Weakness, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Each state shall participate in IEVS required by Section 1137 of the Social Security Act as amended. Fifteen of 60 cases tested lacked adequate documentation to indicate if all components of income verification were gathered and processed correctly. Context: In a statistically valid sample, fifteen of 60 cases tested lacked adequate documentation to indicate if all components of income verification were gathered and processed correctly. Of the deficient cases (note, some cases had multiple deficiencies): • Two of 15 cases lacked evidence to show that the state was using EIS to determine eligibility in accordance with the state plan. • Eight of 15 cases lacked evidence to show the state requested and obtained income verification data from State Wage Information Collection Agency, State unemployment agency, SSA, U.S. Citizenship and Immigration Services, and unearned income from IRS located in the EIS system. • Seven of 15 cases did not have evidence that the management-level pre-authorization review was performed nor that the individual making determinations for the case signed and authorized each step within EIS. Although 15 cases had deficient documentation, each case had some form of income verification documented, implying that all participants would likely have been determined to be eligible if all appropriate steps were taken and all required documentation kept. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of IEVS verification. Criteria: Each state shall participate in the IEVS required by Section 1137 of the Social Security Act as amended. Effect: USDHHS may penalize a state for up to 2 percent of the State Family Assistance Grant for failure to participate in IEVS (42 USC 609(a)(4) and 1320b-7; 45 CFR sections 264.10 and 264.11). Questioned Costs: None Recommendation: DOH management should improve training and supervision to ensure all elements of IEVS determination are performed and adequate documentation is kept. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-062 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Per the 2024 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Two of seven non-cooperative cases tested lacked appropriate documentation to support "waived" penalties. Context: In a statistically valid sample, two of seven non-cooperative cases tested lacked appropriate documentation to support “waived” penalties. For both of these, there was no child support information through Appendix D of the application, yet the penalty was "waived" in EIS and not applied to payments. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of child support non-cooperation provisions. Criteria: Per the 2024 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Effect: USDHHS may penalize a state for up to five percent of the State Family Assistance Grant for failure to substantially comply with this required state child support program (42 USC 608(a)(2) and 609(a)(8); 45 CFR sections 264.30 and 264.31). Questioned Costs: AL 93.558: $ 4,167 Recommendation: DOH management should improve training and supervision to ensure child support noncooperation penalties are appropriately applied. If a penalty is determined to be unapplicable, adequate documentation should be kept to support that determination. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-025 Federal Awarding Agency: U.S. Department of Health and Human Services Impact: Significant Deficiency AL Number and Title: 93.563 Child Support Services (CSS) Federal Award Number: 2001AKCSES, 2201AKCSES Applicable Compliance Requirement: Cash Management Condition: DOR staff processed an FY 24 CSS federal cash draw that was inadequately supported at the time of the draw. Context: The Child Support Enforcement Division’s (CSED) policy is to draw federal funds on a reimbursement basis to ensure compliance with federal cash management regulations. DOR draws are typically supported by receivables that are automatically generated by the State’s accounting system based on the draw periods expenditure transactions. DOR staff performed six cash drawdowns during FY 24 totaling $16.6 million, of which the audit tested three totaling $8.7 million. Of the three cash draws tested, one cash draw for $2.6 million (30 percent of the total tested), that processed in September 2023, was not supported by expenditures in the State’s accounting system. The unsupported draw was manually generated based on the remaining undrawn balance in two prior year federal awards – federal fiscal year 2020 and 2022. DOR management reports CSS expenditures to the federal oversight agency through a quarterly reporting process. According to DOR management, flawed revenue accounting and cash management processes in prior years resulted in revenue shortfalls. DOR management stated the September 2023 draw was intended to correct the shortfall and reimburse the State for expenditures reported to the federal oversight agency under prior year federal awards that were never claimed for reimbursement. DOR management could not provide auditors evidence of expenditures recorded in the State’s accounting system to support the drawn amount until five months after the support was requested. Cause: The lack of support for the draw was due to inadequate cash management procedures including the absence of review by an individual other than the preparer of the draw request. Furthermore, DOR management asserted that weaknesses in the methodology used for drawing federal funds in prior years created an imbalance between program expenditures and revenues that carried forward to FY 24. Criteria: Title 45 CFR 75.302(b)(6) requires the State to establish written procedures to implement the requirements for federal payments to states. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Inadequate internal controls resulted in the unsupported drawdown of federal funds and an increased risk of noncompliance with federal regulations. Questioned Costs: None Recommendation: DOR’s CSED and DAS directors should develop written cash management procedures to ensure federal expenditure reimbursement requests are supported by the State’s accounting records at the time of the draw. Furthermore, DOR management should complete a reconciliation of CSS program expenditures and revenues in the State’s accounting system and resolve all uncleared receivables and cash receipts. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-063 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 Child Care and Development Fund Cluster (CCDF) Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Eligibility Condition: The State lacked sufficient documentation, as outlined in the federal requirements and the state plan, to clearly document what services one child was receiving and if they were authorized for services during the period under audit. Context: In a statistically valid sample, one of 60 case files tested lacked sufficient documentation. The one negligent file did adequately support that the child was approved to receive CCDF services, but it was unclear if those services were authorized to continue during the period under audit. Cause: The deficiency was due to inconsistent understanding of what is considered adequate case notes/file documentation. Criteria: Per the 2024 OMB Compliance Supplement, "Lead Agencies must have procedures in place for documenting and verifying eligibility in accordance with …federal requirements, as well as the specific eligibility requirements elected by each Lead Agency in its approved plan." Effect: Failure to accurately document eligibility decisions could result in benefits provided to applicants who are ineligible for CCDF services. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst case workers on the importance of clear documentation and should increase the review of case files to ensure documentation is adequate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-064 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Reporting Condition: Five of five ACF-696 quarterly reports and three of five FFATA reports selected for testing were submitted after the required due dates. Context: All five ACF-696 quarterly reports tested were submitted later than 30 days after quarter end. Delayed submissions ranged from two to eleven months. Three of five FFATA reports tested were not submitted timely. Delays ranged from four months late to nine months late. Subaward amounts that were not reported timely total $4,382,068.61. Cause: Turnover and staffing shortages amongst staff responsible for reporting and delayed communication between departments who approve awards and those who prepare and submit reports contributed to delayed report submissions. Criteria: Title 45 CFR 98.65(g) requires the State to submit financial reports, in a manner specified by ACF. These reports must be submitted quarterly and are due 30 days after quarter-end. Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Per review of the 2024 OMB Compliance Supplement, reports must be submitted in FSRS "no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made." Effect: The State could be penalized for failing to substantially comply with reporting requirements. Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit timely FFATA reports results in noncompliance with Federal Funding Accountability and Transparency Act. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure all reports are prepared, reviewed, and submitted timely. Specific to FFATA, management should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-065 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Special Tests and Provisions Condition: The State developed a sufficient state plan outlining appropriate procedures for ensuring child care providers serving children who receive subsidies are compliant with relevant health and safety requirements. However, one of 27 selections lacked documentation to adequately support that all controls, as outlined in the state plan, were fully followed. Context: In a statistically valid sample, one of 27 selections had compliance deficiencies related to State created provisions. The deficient selection had adequate documentation to show that the required monitoring checklist had been partially complete during the required annual facility inspection, however significant portions of the checklist were left blank, leading to concern that the inspector may not have thoroughly reviewed all health and safety compliance requirements. Cause: The deficiency was due to inconsistent application of internal processes for completing and documenting facility inspections. Criteria: Per 42 USC 9858c(c)(2)(I) and 45 CFR section 98.41, Lead Agencies must ensure that child care providers serving children who receive subsidies meet applicable health and safety requirements. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Subsidies could be paid to child care providers who do not meet health and safety requirements, which could put children under their care in unsafe conditions. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst staff that perform health and safety inspections. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-063 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 Child Care and Development Fund Cluster (CCDF) Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Eligibility Condition: The State lacked sufficient documentation, as outlined in the federal requirements and the state plan, to clearly document what services one child was receiving and if they were authorized for services during the period under audit. Context: In a statistically valid sample, one of 60 case files tested lacked sufficient documentation. The one negligent file did adequately support that the child was approved to receive CCDF services, but it was unclear if those services were authorized to continue during the period under audit. Cause: The deficiency was due to inconsistent understanding of what is considered adequate case notes/file documentation. Criteria: Per the 2024 OMB Compliance Supplement, "Lead Agencies must have procedures in place for documenting and verifying eligibility in accordance with …federal requirements, as well as the specific eligibility requirements elected by each Lead Agency in its approved plan." Effect: Failure to accurately document eligibility decisions could result in benefits provided to applicants who are ineligible for CCDF services. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst case workers on the importance of clear documentation and should increase the review of case files to ensure documentation is adequate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-064 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Reporting Condition: Five of five ACF-696 quarterly reports and three of five FFATA reports selected for testing were submitted after the required due dates. Context: All five ACF-696 quarterly reports tested were submitted later than 30 days after quarter end. Delayed submissions ranged from two to eleven months. Three of five FFATA reports tested were not submitted timely. Delays ranged from four months late to nine months late. Subaward amounts that were not reported timely total $4,382,068.61. Cause: Turnover and staffing shortages amongst staff responsible for reporting and delayed communication between departments who approve awards and those who prepare and submit reports contributed to delayed report submissions. Criteria: Title 45 CFR 98.65(g) requires the State to submit financial reports, in a manner specified by ACF. These reports must be submitted quarterly and are due 30 days after quarter-end. Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Per review of the 2024 OMB Compliance Supplement, reports must be submitted in FSRS "no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made." Effect: The State could be penalized for failing to substantially comply with reporting requirements. Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit timely FFATA reports results in noncompliance with Federal Funding Accountability and Transparency Act. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure all reports are prepared, reviewed, and submitted timely. Specific to FFATA, management should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-065 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Special Tests and Provisions Condition: The State developed a sufficient state plan outlining appropriate procedures for ensuring child care providers serving children who receive subsidies are compliant with relevant health and safety requirements. However, one of 27 selections lacked documentation to adequately support that all controls, as outlined in the state plan, were fully followed. Context: In a statistically valid sample, one of 27 selections had compliance deficiencies related to State created provisions. The deficient selection had adequate documentation to show that the required monitoring checklist had been partially complete during the required annual facility inspection, however significant portions of the checklist were left blank, leading to concern that the inspector may not have thoroughly reviewed all health and safety compliance requirements. Cause: The deficiency was due to inconsistent application of internal processes for completing and documenting facility inspections. Criteria: Per 42 USC 9858c(c)(2)(I) and 45 CFR section 98.41, Lead Agencies must ensure that child care providers serving children who receive subsidies meet applicable health and safety requirements. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Subsidies could be paid to child care providers who do not meet health and safety requirements, which could put children under their care in unsafe conditions. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst staff that perform health and safety inspections. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-082 Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.859 RDC Federal Award Number: 5P20GM103395-23 Applicable Compliance Requirement: Equipment and Real Property Management Condition: One of the 40 sampled equipment had a lapse of greater than two years between physical inventories. Context: During the testing of equipment for real property management, one item of equipment was found to have an interval between physical inventories that was greater than two years. Inventory for this equipment was taken May 7, 2021, then again June 4, 2024. Cause: University of Alaska Anchorage (UAA) had a loss of information regarding compliance requirements through employee turnover at the responsible department level. Criteria: Per 2 CFR 200.313(d)(2), a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The equipment was not inventoried within the two-year timeframe. Questioned Costs: None Recommendation: UAA management should ensure proper policies and procedures are in place to monitor capital asset inventory observations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-084 Federal Awarding Agency: NASA and USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 43.001, 93.859 RDC Federal Award Number: 80NSSC22K0579, P20GM103395 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: Two of the sampled 40 covered transactions did not have checks for suspension or debarment with the external parties prior to entering the contract. Context: During the testing of suspension and debarment, two grants from the UAF campus had covered transactions, one a subrecipient and another a procurement transaction, that did not have evidence federal excluded parties list system checks were performed prior to entering into the covered transaction. Cause: UAF did not perform timely review of suspension and debarment listings prior to entering into a covered transaction. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Potentially suspended or debarred vendor may have been contracted by the University for a covered transaction. Questioned Costs: None Recommendation: UAF management should perform suspension and debarment checks on all covered transactions paid with federal funds. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4646DRAKP00000001, 4667DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 25 FY 24 Disaster Grants payments found that 14 payments (56 percent) lacked required supporting documentation. Specifically, six payments lacked pay policy and/or fringe benefit calculations and eight payments lacked procurement contracts that included all federal requirements. Additionally, two of the eight payments lacked a complete or signed contract on file. Context: The Federal Emergency Management Agency (FEMA) reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. The applicant is required to submit the following documentation to support labor costs claimed: summary of actual costs for completed work, individual information (such as name, job title, type of employee, days and hours worked, pay rate and fringe benefit rate, and a description of work performed), fringe benefit calculation, and pay policy. FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s pre-disaster written pay policy. Six of the 25 transactions included force account labor that was not supported by a pay policy or benefit calculation. FEMA provides public assistance funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contracting requirements. The applicant must include required provisions detailed in Title 2 CFR 200.327 in all contracts awarded and maintain oversight to ensure that contractors perform according to the conditions and specifications of the contract. FEMA reimburses funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contract requirements. Eight of the 25 transactions included contractor payments and, based on review of the contract, not all federally required provisions were included. Two of the eight were not supported by a signed contract. According to DMVA management, contractors were utilized to provide project management of the federal disasters due to an increased workload and a lack of available DMVA staff. Contractors were tasked with gathering the required documents to ensure projects were administered in accordance with FEMA requirements. Cause: Division of Homeland Security and Emergency Management (DHSEM) lacked written procedures for monitoring contractors. Also, due to staff turnover and an increase in workload, DHSEM management did not adequately monitor contractor’s work. Specifically, to ensure the contractor verified the contracts awarded by subrecipients included federal requirements, final signed contracts were provided to the state, and required documentation was received for the reimbursement of subrecipient force account labor costs. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), 2018, which requires labor costs to be supported by specific documentation: summary of actual costs for completed work; for each individual: name, job title and function, type of employee, days and hours worked, pay rates and fringe benefit rate, and description of work performed; fringe benefit calculations; and pay policy. The PAPPG also requires contracts to include the required provisions in Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses in all contracts awarded. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Lack of fringe benefit calculations and pay policy may result in FEMA limiting public assistance funding to the applicant non-discretionary, uniformly applied pay rates. Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: AL - 97.036: $96,758 AL - 97.036 COVID-19: $2,159 Recommendation: DHSEM’s director should develop written procedures for adequately monitoring DMVA contractors to ensure all federally required documentation is obtained to support reimbursements to subrecipients. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-039 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Four of 12 randomly selected FY 24 Disaster Grants SF-425 reports tested had incorrect matching amounts, one of which also had an incorrect recipient share of expenditures. Context: The SF-425 is a required quarterly federal financial form used for reporting the financial status of federal grant awards. During FY 24, 15 disasters required quarterly SF-425 reports for a total of 58 reports filed. Twelve of the 58 were selected for testing. Due to incorrect calculations, the matching amounts for four reports were understated. One report also reported incorrect recipient share of expenditures. Cause: The errors were due to insufficient procedures over the preparation and review of SF-425 reports. Criteria: Title 44 CFR 206.120(f)(2) prescribes the State shall provide financial status reports. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: The insufficient internal controls resulted in misreported financial data. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DMVA's finance officer should strengthen written procedures for the preparation and review of the SF-425 report to ensure the reports submitted to FEMA are accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-040 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4646DRAKP00000001, 4648DRAKP00000001, 4667DRAKP00000001, 4672DRAKP00000001, 4585DRAKP00000001, 4730DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in FY 24 Disaster Grants program subawards key data elements in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Additionally, the names and total compensation of each of the subrecipient’s five most highly compensated executives, if applicable, were not communicated to DMVA’s DAS staff for data entry into FSRS. Context: The FFATA was signed into law on September 26, 2006, with the intent to empower every American with the ability to hold the government accountable for each spending decision. The FFATA legislation requires information on federal awards be made available to the public via a single, searchable website, at www.usaspending.gov. The FFATA FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. To comply with FFATA requirements, DHSEM staff responsible for Disaster Grants program management obtain subawardee information from the OAD and the assurances and agreement document. The OAD is sent to DAS staff for data entry into FSRS. There were 86 Disaster Grants program subawards subject to FFATA reporting during FY 24. The audit reviewed seven randomly and two judgmentally selected subawards, totaling $6,819,071, for compliance and internal controls testing of FFATA reporting requirements. One of the seven (14 percent) subawards, totaling $1,625,735, reported an incorrect subaward project description and three (43 percent) subawards, totaling $369,218, were not reported timely. One judgmentally selected subaward, totaling $164,393, was not reported timely to FSRS, and one, totaling $4,009,660, was not reported at all. An additional 48 subawards were not reported that should have been. Reporting errors are summarized in the table below. Cause: Staff turnover and vacancies contributed to the errors and omissions. Inadequate procedures resulted in highly compensated executive salaries not being communicated to DAS staff. Since the data was entered directly into FSRS, DAS staff stated the system did not allow for review by a supervisor to ensure accuracy of the data prior to submission. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's finance officer should work with the DHSEM director to strengthen FFATA reporting procedures to ensure required reports are filed timely and key data elements comply with federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4646DRAKP00000001, 4667DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 25 FY 24 Disaster Grants payments found that 14 payments (56 percent) lacked required supporting documentation. Specifically, six payments lacked pay policy and/or fringe benefit calculations and eight payments lacked procurement contracts that included all federal requirements. Additionally, two of the eight payments lacked a complete or signed contract on file. Context: The Federal Emergency Management Agency (FEMA) reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. The applicant is required to submit the following documentation to support labor costs claimed: summary of actual costs for completed work, individual information (such as name, job title, type of employee, days and hours worked, pay rate and fringe benefit rate, and a description of work performed), fringe benefit calculation, and pay policy. FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s pre-disaster written pay policy. Six of the 25 transactions included force account labor that was not supported by a pay policy or benefit calculation. FEMA provides public assistance funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contracting requirements. The applicant must include required provisions detailed in Title 2 CFR 200.327 in all contracts awarded and maintain oversight to ensure that contractors perform according to the conditions and specifications of the contract. FEMA reimburses funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contract requirements. Eight of the 25 transactions included contractor payments and, based on review of the contract, not all federally required provisions were included. Two of the eight were not supported by a signed contract. According to DMVA management, contractors were utilized to provide project management of the federal disasters due to an increased workload and a lack of available DMVA staff. Contractors were tasked with gathering the required documents to ensure projects were administered in accordance with FEMA requirements. Cause: Division of Homeland Security and Emergency Management (DHSEM) lacked written procedures for monitoring contractors. Also, due to staff turnover and an increase in workload, DHSEM management did not adequately monitor contractor’s work. Specifically, to ensure the contractor verified the contracts awarded by subrecipients included federal requirements, final signed contracts were provided to the state, and required documentation was received for the reimbursement of subrecipient force account labor costs. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), 2018, which requires labor costs to be supported by specific documentation: summary of actual costs for completed work; for each individual: name, job title and function, type of employee, days and hours worked, pay rates and fringe benefit rate, and description of work performed; fringe benefit calculations; and pay policy. The PAPPG also requires contracts to include the required provisions in Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses in all contracts awarded. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Lack of fringe benefit calculations and pay policy may result in FEMA limiting public assistance funding to the applicant non-discretionary, uniformly applied pay rates. Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: AL - 97.036: $96,758 AL - 97.036 COVID-19: $2,159 Recommendation: DHSEM’s director should develop written procedures for adequately monitoring DMVA contractors to ensure all federally required documentation is obtained to support reimbursements to subrecipients. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-037 Federal Awarding Agency: USDHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Federal Award Number: 4646DRAKP00000001, 4661DRAKP00000001, 4672DRAKP00000001, 4730DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of 16 FY 24 Disaster Grants program subrecipients’ obligating award documents (OAD) found seven did not include all federally required information and one was also missing a completed assurances and agreement form. Context: Effective April 4, 2022, the unique entity identifier (UEI) replaced the Data Universal Numbering System number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. DMVA enters into awards with subrecipients using the OAD as the subgrant agreement. The subrecipient’s name and UEI are recorded on the OAD. An assurances and agreement form accompanies the OAD that includes additional federal requirements not included in the OAD. Subrecipients sign the OAD and the assurances and agreement forms certifying and agreeing to the federal requirements. According to DHSEM management, DMVA contractors assisted division staff in completing the OADs with subrecipients and provided project management for the federal disasters. Contractors were needed due to the increased workload resulting from the 2018 Cook Inlet earthquake, COVID-19 pandemic, and state declared disasters. The audit reviewed a random sample of 16 of 143 subrecipients’ OADs, including assurances and agreement forms, and found seven had the following errors: two included a subrecipient’s name that did not match the UEI number provided, of which one also included a period of performance that did not agree with the federally approved project performance period; one did not include a UEI number; one included a name and UEI number that could not be found in the federal system for award management (sam.gov) and did not have the completed assurances and agreement form; and three included a period of performance that did not agree with the federally approved project performance periods. Cause: Due to staff turnover and an increase in workload, DHSEM staff did not monitor contractors to ensure subrecipient information was accurately documented on the OAD, the assurances and agreement form was complete, and information was in sam.gov before issuing the subaward. Furthermore, DHSEM management and contractors lacked procedures to ensure all required information was obtained and documented on the OAD, including adequate DHSEM review procedures. Criteria: Title 2 CFR 200.332 requires pass-through entities ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required information at the time of the subaward. Required information includes subaward period of performance start and end dates, subrecipient UEI, and the subrecipient’s name, which must match the name associated with the subrecipient’s UEI. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Not providing accurate and complete information in the subaward documents increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DHSEM’s director should develop written procedures and adequately monitor contractors to ensure federally required information is accurately identified on the OAD and completed assurance and agreement forms are received from the subrecipient certifying agreement with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-039 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Four of 12 randomly selected FY 24 Disaster Grants SF-425 reports tested had incorrect matching amounts, one of which also had an incorrect recipient share of expenditures. Context: The SF-425 is a required quarterly federal financial form used for reporting the financial status of federal grant awards. During FY 24, 15 disasters required quarterly SF-425 reports for a total of 58 reports filed. Twelve of the 58 were selected for testing. Due to incorrect calculations, the matching amounts for four reports were understated. One report also reported incorrect recipient share of expenditures. Cause: The errors were due to insufficient procedures over the preparation and review of SF-425 reports. Criteria: Title 44 CFR 206.120(f)(2) prescribes the State shall provide financial status reports. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: The insufficient internal controls resulted in misreported financial data. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DMVA's finance officer should strengthen written procedures for the preparation and review of the SF-425 report to ensure the reports submitted to FEMA are accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-040 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4646DRAKP00000001, 4648DRAKP00000001, 4667DRAKP00000001, 4672DRAKP00000001, 4585DRAKP00000001, 4730DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in FY 24 Disaster Grants program subawards key data elements in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Additionally, the names and total compensation of each of the subrecipient’s five most highly compensated executives, if applicable, were not communicated to DMVA’s DAS staff for data entry into FSRS. Context: The FFATA was signed into law on September 26, 2006, with the intent to empower every American with the ability to hold the government accountable for each spending decision. The FFATA legislation requires information on federal awards be made available to the public via a single, searchable website, at www.usaspending.gov. The FFATA FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. To comply with FFATA requirements, DHSEM staff responsible for Disaster Grants program management obtain subawardee information from the OAD and the assurances and agreement document. The OAD is sent to DAS staff for data entry into FSRS. There were 86 Disaster Grants program subawards subject to FFATA reporting during FY 24. The audit reviewed seven randomly and two judgmentally selected subawards, totaling $6,819,071, for compliance and internal controls testing of FFATA reporting requirements. One of the seven (14 percent) subawards, totaling $1,625,735, reported an incorrect subaward project description and three (43 percent) subawards, totaling $369,218, were not reported timely. One judgmentally selected subaward, totaling $164,393, was not reported timely to FSRS, and one, totaling $4,009,660, was not reported at all. An additional 48 subawards were not reported that should have been. Reporting errors are summarized in the table below. Cause: Staff turnover and vacancies contributed to the errors and omissions. Inadequate procedures resulted in highly compensated executive salaries not being communicated to DAS staff. Since the data was entered directly into FSRS, DAS staff stated the system did not allow for review by a supervisor to ensure accuracy of the data prior to submission. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's finance officer should work with the DHSEM director to strengthen FFATA reporting procedures to ensure required reports are filed timely and key data elements comply with federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-083 Prior Year Finding: Federal Awarding Agency: National Science Foundation Impact: Significant Deficiency AL Number and Title: 47.076 RDC Federal Award Number: 1839290 Applicable Compliance Requirement: Period of Performance Condition: One of 40 sampled transactions were coded incorrectly to the wrong grant. Context: During testing of period of performance, one transaction was observed that appeared to have been liquidated beyond 120 days after the end of the period of performance. Upon further inspection, we concluded that the transaction was coded to the incorrect grant. The correct grant was still within the 120-day liquidation period after the end of the period of performance. Cause: UAF did not perform timely close out procedures on the grant which resulted in incorrectly coded expenditures to go undetected. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: One transaction was incorrectly coded to the wrong grant. Questioned Costs: None Recommendation: UAF management should adhere to their existing requirements for timely grant close out procedures. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-026 Federal Awarding Agency: U.S Department of Agriculture (USDA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: Summer 2021 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: DEED’s child nutrition services (CNS) management authorized Summer 2021 P-EBT benefits for ineligible children. Context: The Families First Coronavirus Response Act (P. L. 116-127), as amended by the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L 116-159), the Consolidated Appropriations Act, 2021 (P.L. 116-260), and the American Rescue Plan Act, 2021 (P.L 117-2) authorized a temporary assistance program for households with children without access to meals in school during the public health emergency declared January 27, 2020. The Families First Coronavirus Response Act, Section 1101 required P-EBT benefits to be issued in accordance with the State’s federally approved plan. DEED’s CNS staff and the Department of Health’s Division of Public Assistance developed a joint plan to issue P-EBT benefits to eligible children for the summer of 2021. The plan, approved by USDA in August 2021, required DEED’s CNS staff to determine eligibility for school age children. Pursuant to the approved plan, school children who were eligible to receive free or reduced-price National School Lunch Program meals as of the end of school year 2020–2021 were eligible for Summer 2021 P-EBT benefits. Auditors found DEED’s CNS staff authorized P-EBT benefits totaling $62,816 to 104 ineligible children. This included 46 children enrolled in an ineligible institution and 58 children that were not verified as being eligible at the end of the 2020-2021 school year. Cause: DEED’s CNS management attributed the issuance of unauthorized benefits to human error. Internal controls implemented by DEED management were inadequate to ensure benefits were only authorized for eligible children. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. The Families First Coronavirus Response Act, Pub. L. 116-127, Section 1101 and federal program guidance requires that P-EBT benefits be issued in accordance with the State's approved plan. Alaska’s State Plan for P-EBT Children in School and Child Care, Summer 2021, section 3(f), established the framework for payments to eligible school-aged children. The plan provides that summer P-EBT benefits were to be issued to students identified as eligible for National School Lunch Program meals at the conclusion of school year 2020–2021. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or inaccurate. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding or terminating funding. Questioned Costs: AL 10.542: $62,816 Recommendation: Although the P-EBT program has concluded, if relevant in the future, DEED’s Child Nutrition Programs manager should improve controls to ensure compliance with federal summer free lunch program requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-052 Prior Year Finding: Federal Awarding Agency: 2023-032 U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: School Year 2020–2021, Summer 2021 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: DOH’s DPA did not determine or distribute benefits to school children or children in child care in accordance with the process and timeframes in the federally approved state plan. The audit identified the following deficiencies in FY 24: • The children in child care beneficiaries were not identified as required by the school year 2020–2021 state plan. • The per child benefit amount paid to the 15,697 children in child care was understated by $6.21 and 125 children were included in both the student and the child care benefit eligibility lists. • Issuance records provided by DPA’s Electronic Benefits Transfer (EBT) contractor, Fidelity National Information Services (FIS), were $795,659 more than DPA reported issuances. Furthermore, the FIS report included $28,992 in duplicate summer 2021 benefit issuances to school children. • School year 2020–2021 student beneficiaries paid in FY 24 received benefits at least two years late and the children in child care beneficiaries were paid benefits at least 20 months late. Summer of 2021 beneficiaries paid in FY 24 received benefits at least 20 months late. Context: The Families First Coronavirus Response Act (FFCRA) (P. L. 116-127) authorized a temporary assistance program for households with children without access to meals in school and to certain Supplemental Nutrition Assistance Program (SNAP)-enrolled children in child care during the public health emergency declared January 27, 2020. Under the P-EBT program school children were eligible for benefits if the child would have received free or reduced-price meals at a school through the National School Lunch Program if not for a school’s closure, or reduced attendance or hours, for at least five consecutive days due to the COVID-19 pandemic. Children enrolled in a child care facility were also eligible for the program if the child was a member of a household that received SNAP benefits after October 1, 2020. P-EBT benefits were to be issued in accordance with a federally approved state plan. DPA and the Department of Education and Early Development, Child Nutrition Services (CNS) section, developed joint plans to issue P-EBT benefits to eligible school children and children in child care for the school year 2020–2021 and summer 2021. The school year 2020–2021 plan was approved by USDA in June 2021 and the summer 2021 plan was approved by USDA in August 2021. The approved plans required CNS to determine eligibility for school age children and DPA to determine eligibility for children in child care. CNS staff determined school children eligibility and calculated benefits using operating and enrollment information obtained from school districts. DPA staff determined children in child care eligibility for school year 2020–2021 using data from the Eligibility Information System (EIS). DPA issued children in child care benefits to all SNAP eligible children that were under the age of six at any time between October 2020 and June 2021. All children determined eligible at the end of school year 2020–2021 were deemed eligible for summer 2021 benefits. The school year 2020–21 plan outlined that P-EBT benefits for the period August 2020 through December 2020 were to be issued beginning July 2021 and benefits for the period January 2021 through August 2021 were to be issued beginning in August 2021. Additionally, the plan outlined that benefit issuances to children in child care were to begin September 22, 2021. The summer 2021 plan outlined that benefits to students and children in child care were to be issued in September 2021 and October 2021, respectively. The approved plans also required the State to ensure that children did not receive a child care benefit and a school benefit for the same month. Additionally, the State was to confirm monthly eligibility for SNAP-enrolled children under the age of six living in the area of a school that was closed or operating at reduced attendance. Benefit levels for these children were to be set at the same rate as the average P-EBT benefit for school children in the same area. Furthermore, the State was to identify areas that did not have a school operating at reduced attendance or hours, but were experiencing a reduction in child care access each month using Child and Adult Care Food Program meal claim data provided by CNS. The State was to identify facilities with a 25 percent reduction in meal claims and provide benefits equal to the statewide average P-EBT benefit for school children. DPA was to gather demographic data from the child care facilities to match against SNAP EIS data to identify eligible children. The status of the facilities was to be examined each quarter to determine benefit levels. As noted above, the approved process was not followed and all SNAP-enrolled children under the age of six were determined eligible and received benefits. USDA’s memo approving Alaska’s P-EBT 2020–2021 state plan outlines that any significant impairment in the ability to implement the approved P-EBT plan or substantive changes should be communicated to USDA as soon as possible. No substantive changes regarding the eligibility determination process were communicated by DPA to USDA in FY 24. DPA staff alerted USDA in June 2023 that P-EBT issuances would extend to December 31, 2023. Between July 2023 and April 2024 DPA issued P-EBT benefits (per FIS data) totaling approximately $43.2 million. Cause: DPA management asserted that the children in child care population could not be identified as originally agreed upon under the school year 2020–2021 state plan and that a deviation from the plan was necessary to provide the benefits. The understated benefit amount was due to a calculation error. DPA lacked supervisory review procedures to ensure the accuracy of the benefit calculation and to prevent children from appearing on both student and child care eligibility lists. DPA management and FIS staff could not explain the variance between FIS reported issuance amounts and the amounts reported by DPA staff to USDA. DPA management asserted that benefit issuance delays were attributable to untimely receipt of eligibility data from CNS and system limitations that prevented the division from utilizing EIS to issue benefits. Delayed payments to SNAP-enrolled school children in child care were ascribed to competing priorities and difficulty identifying child care facility closures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. FFCRA, Pub. L. 116-127, Section 1101 and federal program guidance required that P-EBT benefits be issued in accordance with the State's approved plan. Alaska’s State Plan for P-EBT Children in School and Child Care, 2020–2021, section 5, describes how the State will identify eligible children in child care and calculate benefits. Alaska’s State Plan for P-EBT Children in School and Child Care, 2020–2021, section 7, establishes the framework for initial retroactive payment to eligible children from the beginning of the school year to June 2021. The plan outlines that benefits for the period of August 2020 through December 2020 would be issued beginning July 2021 and benefits for January 2021 through June 2021 would be issued beginning August 2021. Alaska’s State Plan for P-EBT Children in School and/or Child care, Summer 2021, section 3 establishes a tentative issuance schedule as September 2021 for school children and October 2021 for children in child care, and USDA encouraged the State to distribute benefits in two or three issuances across the summer of 2021, to the extent practical. Section 3 also outlines the framework for identifying eligible school children and children in child care for summer 2021 P-EBT benefits. USDA Memo, P-EBT Approval of Alaska’s State Plan for Summer 2021, Plan Timetable and Revisions section provides that Alaska will distribute benefits to households consistent with the timeframes identified in the state plan. If any challenges or delays significantly impair the State’s ability to implement the approved plan or require substantive changes to the plan, the State must notify USDA’s Food and Nutrition Services (FNS) regional office as soon as possible. Effect: The delayed P-EBT payment processing reduced access to food benefits. Significant delays in issuing benefits increased the risk that eligibility data had grown stale and intended recipients did not receive the benefits. DPA management’s noncompliance with the federally approved plans may result in the federal awarding agency issuing sanctions or disallowances. Questioned costs were indeterminate due to the unreliability of FIS data. Questioned Costs: AL 10.542: Indeterminate Recommendation: DOH’s commissioner should allocate the resources necessary to ensure effective systems are in place to properly administer federal programs. Views of Responsible Officials: The department partially agrees with the finding. The Division of Public Assistance disagrees with the finding regarding issuance timelines. The division communicated with FNS regarding manual benefit issuance for Alaska expressing timelines would be affected and FNS did not request an updated timeline. Communication with FNS regarding issuance remained consistent, with no indication to alter our issuance plan. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the division consistently communicated with FNS regarding procedural delays affecting the payment timeline and that FNS did not request an updated timeline; however, DPA management could not provide evidence that FNS waived the requirement to submit an updated timeline.

Finding No. 2024-053 Prior Year Finding: 2023-034 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 24 SNAP benefits reported to USDA as issued by the State’s EBT contractor, FIS, was $2,628,951 more than the amount of authorized benefits reported in data from DPA’s EIS. Furthermore, FIS could not provide a reliable audit trail of issuances. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts, to the State’s EBT contractor, FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 24 the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS data or the amounts reported by DPA to USDA. Furthermore, FIS could not provide a detailed list of issuances to support the monthly amounts reconciled by DPA staff and reported to USDA. As a result, the audit could not verify the accuracy and completeness of benefit calculations. Cause: DPA management and FIS staff could not identify the cause of the variances. DPA’s outdated legacy information system and the lack of daily reconciliations (see Finding No. 2024-055) contributed to the deficiencies. Criteria: Title 7 CFR 274.1(h) requires that the State agency create and maintain a master issuance file that consolidates records of all certified SNAP households, record participation activity for each household, and supply all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $2,628,951 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. Views of Responsible Officials: The department agrees with the finding, but not the questioned cost. The Division of Public Assistance performs monthly reconciliations and balancing efforts to ensure accuracy with routine FIS reports, EIS authorization and issuance reports, and federal reporting. However, the division agrees that a new ad hoc report created for this audit by the EBT contractor, FIS, does not match with issuances and reporting. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states the monthly reconciliations of FIS, EIS, and federal reports ensures the accuracy of issuance data; however, DPA management could not provide evidence that eligibility determinations in EIS supported FIS benefit issuances. Furthermore, FIS payment issuance details did not support the summary data used in the monthly reconciliations.

Finding No. 2024-054 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Testing of 42 SNAP recipient cases to verify the completeness and accuracy of benefit calculations found 37 (88 percent) were incorrect or unsupported, including 24 (57 percent) in which the recipients’ application or reports of changes were not processed within federally required timeframes. Testing of 42 SNAP recipient cases to verify the adequacy of case information stored in EIS and DOH’s document management system, ILINX, found 18 (43 percent) had inadequate verifications of required information. Context: The State is required to ensure only eligible households receive supplemental nutrition assistance. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations; automatically cut off households at the end of a certification period unless recertified; and provide the data necessary to meet federal issuance and reconciliation reporting requirements. DPA eligibility technicians (ET) review applications, verify income and resources, and make a determination whether a household is eligible to receive benefits. ETs obtain and upload source documentation into ILINX and manually update EIS with information from source documentation. As part of determining benefit eligibility, the State is required to coordinate the exchange of data with other agencies, such as the federal Social Security Administration, State employment security agency, and current employers, to verify the household’s identity, income, resources, and other eligibility criteria. ET actions taken, verifications performed, and contacts made are recorded using the EIS’s case note screen. Source documentation supporting the eligibility determination is retained in ILINX. To help ensure the accuracy and completeness of EIS information, DPA conducts training and requires supervisors to perform quality control reviews. On November 3, 2023, DOH management submitted a request to FNS to waive federally required interviews and certain verifications of SNAP household eligibility criteria in order to address the ongoing backlog of SNAP cases that built up during the COVID-19 public health emergency. FNS denied the waiver request on November 22, 2023. Disregarding the denial, DOH management informed FNS of the State’s intent to streamline the verification process, whereby ETs, when verifications are not available, authorized SNAP benefits without performing federally required verifications. The EIS legacy system relies on manual processes to adequately support the eligibility and benefit determinations, and ensure the determinations are accurate. Of the 42 SNAP cases tested the following errors were identified, and some cases had multiple errors: • Twenty-two SNAP households’ (52 percent) monthly allotment could not be corroborated by the information in EIS and/or ILINX. • Twenty-four SNAP applications (57 percent) were not processed timely. Fifteen of the 24 were processed 100 or more days after receipt by DPA, including one application that was processed after 295 days. • Nine SNAP applications (21 percent) were certified eligible without an interview at initial application or recertification. Cause: To resolve DPA’s backlog of SNAP applications and recertifications, on December 8, 2023, DOH’s Commissioner directed ETs to process all applications, recertifications and renewals without verifying federally required eligibility information. DPA management informed FNS that the State would reassess these temporary processing procedures after six months or earlier. Furthermore, due to competing priorities, quality control reviews were not consistently performed during FY 24. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all case file information necessary for the eligibility determinations and benefit computations including, but not limited to, all household members’ names, addresses, dates of birth, social security numbers, individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 272.8(a)(1) requires the State maintain and use an income and eligibility verification system to request wage and benefit information from various agencies and use that information to verify eligibility for, and the amount of, SNAP benefits due to eligible households. Title 7 CFR 273.2(f)(1) requires the State to verify certain household income, expenses, and circumstances necessary to determine eligibility prior to certifying a household for SNAP benefits. Title 7 CFR 273.2(f)(6) requires that case files be documented to support eligibility, ineligibility, and benefit level determinations. Documentation shall be in sufficient detail to permit a reviewer to determine the reasonableness and accuracy of the determination. Effect: Inadequate, outdated, or unsupported case file information increases the risk of incorrect or ineligible benefits. Errors in SNAP determinations could result in further sanctions and/or penalties imposed on DOH. Questioned Costs: AL 10.551: $59,073 Recommendation: DOH’s commissioner should allocate the resources necessary to administer SNAP in accordance with federal regulations. DPA’s director should increase staff training and quality control reviews to help ensure procedures are followed for determining SNAP eligibility and retaining required documentation, including the documentation to support compliance with verifications of income through required data exchanges. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-055 Prior Year Finding: 2023-035 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 24. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s U.S. Treasury benefit account and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the U.S. Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 24, required daily reconciliations were not performed. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer’s credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: The lack of daily reconciliations increases the risk of unidentified processing errors and unallowable costs, including potential non-federal liabilities. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-053 Prior Year Finding: 2023-034 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 24 SNAP benefits reported to USDA as issued by the State’s EBT contractor, FIS, was $2,628,951 more than the amount of authorized benefits reported in data from DPA’s EIS. Furthermore, FIS could not provide a reliable audit trail of issuances. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts, to the State’s EBT contractor, FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 24 the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS data or the amounts reported by DPA to USDA. Furthermore, FIS could not provide a detailed list of issuances to support the monthly amounts reconciled by DPA staff and reported to USDA. As a result, the audit could not verify the accuracy and completeness of benefit calculations. Cause: DPA management and FIS staff could not identify the cause of the variances. DPA’s outdated legacy information system and the lack of daily reconciliations (see Finding No. 2024-055) contributed to the deficiencies. Criteria: Title 7 CFR 274.1(h) requires that the State agency create and maintain a master issuance file that consolidates records of all certified SNAP households, record participation activity for each household, and supply all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $2,628,951 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. Views of Responsible Officials: The department agrees with the finding, but not the questioned cost. The Division of Public Assistance performs monthly reconciliations and balancing efforts to ensure accuracy with routine FIS reports, EIS authorization and issuance reports, and federal reporting. However, the division agrees that a new ad hoc report created for this audit by the EBT contractor, FIS, does not match with issuances and reporting. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states the monthly reconciliations of FIS, EIS, and federal reports ensures the accuracy of issuance data; however, DPA management could not provide evidence that eligibility determinations in EIS supported FIS benefit issuances. Furthermore, FIS payment issuance details did not support the summary data used in the monthly reconciliations.

Finding No. 2024-054 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Testing of 42 SNAP recipient cases to verify the completeness and accuracy of benefit calculations found 37 (88 percent) were incorrect or unsupported, including 24 (57 percent) in which the recipients’ application or reports of changes were not processed within federally required timeframes. Testing of 42 SNAP recipient cases to verify the adequacy of case information stored in EIS and DOH’s document management system, ILINX, found 18 (43 percent) had inadequate verifications of required information. Context: The State is required to ensure only eligible households receive supplemental nutrition assistance. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations; automatically cut off households at the end of a certification period unless recertified; and provide the data necessary to meet federal issuance and reconciliation reporting requirements. DPA eligibility technicians (ET) review applications, verify income and resources, and make a determination whether a household is eligible to receive benefits. ETs obtain and upload source documentation into ILINX and manually update EIS with information from source documentation. As part of determining benefit eligibility, the State is required to coordinate the exchange of data with other agencies, such as the federal Social Security Administration, State employment security agency, and current employers, to verify the household’s identity, income, resources, and other eligibility criteria. ET actions taken, verifications performed, and contacts made are recorded using the EIS’s case note screen. Source documentation supporting the eligibility determination is retained in ILINX. To help ensure the accuracy and completeness of EIS information, DPA conducts training and requires supervisors to perform quality control reviews. On November 3, 2023, DOH management submitted a request to FNS to waive federally required interviews and certain verifications of SNAP household eligibility criteria in order to address the ongoing backlog of SNAP cases that built up during the COVID-19 public health emergency. FNS denied the waiver request on November 22, 2023. Disregarding the denial, DOH management informed FNS of the State’s intent to streamline the verification process, whereby ETs, when verifications are not available, authorized SNAP benefits without performing federally required verifications. The EIS legacy system relies on manual processes to adequately support the eligibility and benefit determinations, and ensure the determinations are accurate. Of the 42 SNAP cases tested the following errors were identified, and some cases had multiple errors: • Twenty-two SNAP households’ (52 percent) monthly allotment could not be corroborated by the information in EIS and/or ILINX. • Twenty-four SNAP applications (57 percent) were not processed timely. Fifteen of the 24 were processed 100 or more days after receipt by DPA, including one application that was processed after 295 days. • Nine SNAP applications (21 percent) were certified eligible without an interview at initial application or recertification. Cause: To resolve DPA’s backlog of SNAP applications and recertifications, on December 8, 2023, DOH’s Commissioner directed ETs to process all applications, recertifications and renewals without verifying federally required eligibility information. DPA management informed FNS that the State would reassess these temporary processing procedures after six months or earlier. Furthermore, due to competing priorities, quality control reviews were not consistently performed during FY 24. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all case file information necessary for the eligibility determinations and benefit computations including, but not limited to, all household members’ names, addresses, dates of birth, social security numbers, individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 272.8(a)(1) requires the State maintain and use an income and eligibility verification system to request wage and benefit information from various agencies and use that information to verify eligibility for, and the amount of, SNAP benefits due to eligible households. Title 7 CFR 273.2(f)(1) requires the State to verify certain household income, expenses, and circumstances necessary to determine eligibility prior to certifying a household for SNAP benefits. Title 7 CFR 273.2(f)(6) requires that case files be documented to support eligibility, ineligibility, and benefit level determinations. Documentation shall be in sufficient detail to permit a reviewer to determine the reasonableness and accuracy of the determination. Effect: Inadequate, outdated, or unsupported case file information increases the risk of incorrect or ineligible benefits. Errors in SNAP determinations could result in further sanctions and/or penalties imposed on DOH. Questioned Costs: AL 10.551: $59,073 Recommendation: DOH’s commissioner should allocate the resources necessary to administer SNAP in accordance with federal regulations. DPA’s director should increase staff training and quality control reviews to help ensure procedures are followed for determining SNAP eligibility and retaining required documentation, including the documentation to support compliance with verifications of income through required data exchanges. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-055 Prior Year Finding: 2023-035 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 24. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s U.S. Treasury benefit account and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the U.S. Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 24, required daily reconciliations were not performed. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer’s credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: The lack of daily reconciliations increases the risk of unidentified processing errors and unallowable costs, including potential non-federal liabilities. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-034 Federal Awarding Agency: U.S. Department of Defense (USDOD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 National Guard Military Operations and Maintenance Projects (NGMOMP) Federal Award Number: W91ZRU-20-2-1001, W91ZRU-21-2-1001, W91ZRU-22-2-1001, W91ZRU-23-2-1001, W91ZRU-24-2-1001 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: The State’s accounting system was not updated for changes to the FFY 24 federally certified Facilities Inventory and Support Plan (FISP), which is used to allocate costs to the NGMOMP program. Context: The FISP is USDOD’s federal registry of real property inventory and includes detailed information of all federal/state owned and state operated Army National Guard (ARNG) facilities within the state. All ARNG facilities are owned by, leased for, or licensed to the State. As a result, the State operates and maintains all ARNG facilities. The FISP identifies the level of federal reimbursement authorized for each real property facility through support codes. National Guard Regulations (NGR) Pamphlet 420-10, Chapter 7, provides the support codes with the corresponding federal funding level percentage (i.e. 100 percent, 75 percent, 50 percent, or no support provided). The FISP is annually updated and certified to identify new facilities, changes in funding support, or facilities no longer supported by USDOD. The certified FISP is provided to DMVA management for tracking of ARNG facilities and determining the appropriate funding levels. DMVA management tracks the facilities using location codes in the State’s accounting system. The appropriate federal and State funding level is assigned to each location code. In FY 24 there were expenditures for 139 facility location codes. The audit reviewed all 139 facilities and found 11 (eight percent) had expenditures allocated at a higher federal rate than authorized in the FISP and one of the 11 locations was not listed on the FISP. Cause: DMVA’s procedures were insufficient to ensure the FISP was reviewed annually to identify changes in the facility support codes that require coding changes in the State’s accounting system. DMVA management also applied a higher reimbursement rate based on misinterpretation of multi-use facilities. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.403 requires costs to be necessary, reasonable, and allocable to the federal award, and to conform to any limitations or exclusions in the federal awards as to types or amount of cost items. NGR 5-1 Section 5-4, dated May 28, 2010, states that when there is an identified cost share in an agreement, the grantor shall reimburse the grantee only for the grantor’s percentage share of the total allowable costs. NGR 420-10, Policy and Guidance for ARNG Facilities Program, dated September 2019, states the rate of reimbursement to the State for all authorized charges shall be based on the FISP support codes for the facility generating the expenditure. Effect: Failing to update the State’s accounting system resulted in DMVA management overcharging expenditures to the federal program. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including withholding/terminating funding. Questioned Costs: AL 12.401: $88,984 Recommendation: DMVA’s Division of Administrative Services (DAS) director and the Army Guard Facilities Maintenance director should strengthen procedures to ensure the State’s accounting system is updated annually based on revisions to the certified FISP and ensure the proper codes are used for multi-use facilities. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-035 Federal Awarding Agency: USDOD Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 NGMOMP Federal Award Number: W91ZRU-23-2-1001, W91ZRU-23-2-1004, W91ZRU-23-2-1005, W91ZRU-23-2-1010, W91ZRU-23-2-1021E, W91ZRU-23-2-1021K, W91ZRU-23-2-1040 Applicable Compliance Requirement: Period of Performance Condition: Six of seven award extensions for the NGMOMP program were untimely. Additionally, one award was not closed timely. Context: National Guard Bureau Grants and Cooperative Agreement Policy Letter 21-07, effective date July 19, 2021, revised the program period of performance requirements for extension requests to be submitted no later than 10 days prior to the end of the 120-day award closeout period. Award extension requests were required to be submitted no later than January 21, 2024. Three of the six extension requests were submitted on January 30, 2024 (nine days late); two were submitted on January 25, 2024 (six days late); and one was submitted on January 22, 2024 (one day late). The policy letter also revised the timeframe for award closeout requiring the grantee to conduct closeout within 120 calendar days from the end of the period of performance. Two awards closed during FY 24, of which one did not have a final accounting submitted within the 120 days. Award closeout was submitted approximately 200 days after the end of the period of performance or approximately 80 days late. Cause: DMVA has written procedures for federal extension requests and award closure. However, competing priorities resulted in untimely submission of extension requests. The final reimbursement requests were submitted to USDOD on January 25, 2024, six days before the end of the closeout period. Federal payment was not received until March 19, 2024. Due, in part, to the untimely receipt of the payments, closeout documentation was not signed by all necessary parties until April 13, 2024. Criteria: Per Title 2 CFR 200.308(e)(2) all requests for one-time extension should be submitted at least 10 calendar days before the conclusion of the period of performance. Title 2 CFR 200.344 prescribes the pass-through entity must close out the federal award when it determines that all administrative actions and required work of the federal award have been completed. A recipient must submit all reports and liquidate all financial obligations no later than 120 days after the conclusion of the period of performance. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Untimely award extension requests and award closeouts may result in unallowable program expenditures. Questioned Costs: None Recommendation: DMVA’s DAS director should follow procedures to ensure cooperative award extensions and award closeout documents are submitted timely, including requesting final payments timely, given the extended timeframe for federal reimbursement. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-043 Federal Awarding Agency: United States Department of the Interior (USDOI) Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.605,15.611 Fish and Wildlife Cluster (FWC) Federal Award Number: F22AF02164, F22AF01666 and F22AF01963 Applicable Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Condition: Testing a random sample of 60 FY 24 non-personal service expenditures charged to the FWC identified two expenditures that lacked proper approval, and one that charged unallowable costs to the FWC. Context: DFG’s primary internal control over financial transactions is knowledgeable DFG staff review of invoices or other supporting documentation to ensure the costs are allowable, supported, coded to the correct program, and within the period of performance. This review is demonstrated by the approver’s signature on the invoice or other supporting documentation authorizing payment. In FY 22, the processing of DFG transactions transitioned to the Department of Administration’s (DOA) centralized Shared Services of Alaska (SSoA). DFG submits invoices with coding and approval to SSoA to initiate processing. According to SSoA procedures, a final verification of coding and approval by departmental administrative services staff prior to SSoA processing is optional. The audit tested a random sample of 60 non-personal services expenditure transactions. Auditors identified two transactions that lacked DFG staff signature authorization. In addition, one transaction approved by DFG staff totaling $206.24 was not allowable due to the costs being for advertising a big game hunt permit raffle. Cause: DFG management attributed the errors to changes in the internal control environment, specifically the shift in non-personal service expenditure input and certification in the accounting system from DFG staff to SSoA staff. Furthermore, management noted that this transition weakened the control processes and emphasized that unauthorized payments should not have been processed by SSoA staff. DFG management also cited DFG staff turnover and inadequate training as a contributing factor. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that a state is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Per Title 50 CFR 80.54, ineligible activities include those conducted for the primary purpose of producing income. Per Title 2 CFR 200.421, the only allowable advertising costs are those which are solely for: staff recruitment, goods and services for the performance of a federal award, disposal of materials acquired in the performance of a federal award, and program outreach (such as recruiting project participants) and other specific purposes necessary to meet federal award requirements. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or miscoded. Furthermore, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including adding reporting requirements or withholding/terminating funding. Questioned Costs: ALN 15.611: $206 Recommendation: DFG’s Division of Administrative Service (DAS) director and Division of Wildlife Conservation director should work together to improve training for DFG staff to ensure expenditures charged to FWC are allowable and properly authorized prior to processing by SSoA staff. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-044 Federal Awarding Agency: USDOI Impact: Material Weakness AL Number and Title: 15.605, 15.611 FWC Federal Award Number: Multiple Applicable Compliance Requirement: Equipment and Real Property Management Condition: Auditors could not obtain sufficient and appropriate evidence to verify compliance with FWC’s equipment and real property management requirements. Context: DFG is responsible for ensuring equipment, real property, and capital improvements, acquired with FWC funds, are used for an authorized purpose, sufficiently tracked, and appropriately disposed of in accordance with federal regulations. In FY 24, DFG staff did not maintain sufficient evidence to demonstrate compliance with equipment and real property management requirements. DFG equipment and real property records did not reliably catalog the universe of equipment, real property, and capital improvements funded with FWC grant monies. Equipment records were incomplete and not trackable by funding source in the accounting system. As a result, the audit was unable to determine the extent of equipment purchased with FWC funds. Real property records had not been reconciled since 2019 and could not be matched with DFG site visit logs. The audit could not identify the FWC assets to be monitored and the extent of site visits conducted during the audit period, and whether the site visits included monitoring for authorized uses. Cause: DFG management attributed the deficiencies to a lack of department-wide procedures, staff turnover, and insufficient training. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 2 CFR 200.311 and Title 50 CFR 80.134 requires the State to use real property for the purpose authorized in the grant for as long as it is needed for that purpose. When real property is no longer needed for the originally authorized purpose, property must be disposed of in accordance with federal requirements. Title 2 CFR 200.313 requires the State to use, manage and dispose of equipment acquired under a federal award in accordance with State laws and procedures. Such equipment must be used for the project or program for which it was acquired and for as long as needed. The State agency must maintain equipment property records, perform physical inventory of equipment, develop a control system, and perform regular maintenance of equipment. Title 50 CFR 80.133 requires the State to maintain acquired or completed capital improvements under FWC grants to ensure that each capital improvement continues to serve its authorized purpose during its useful life. Effect: The lack of department-wide procedures increases the risk that FWC funded assets are not used for authorized purposes and properly disposed of when no longer needed. Inadequate equipment tracking increases the risk of loss or theft. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DFG’s commissioner should ensure procedures are developed and training is implemented so that FWC funded equipment, real property and capital improvements are managed in compliance with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-043 Federal Awarding Agency: United States Department of the Interior (USDOI) Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.605,15.611 Fish and Wildlife Cluster (FWC) Federal Award Number: F22AF02164, F22AF01666 and F22AF01963 Applicable Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Condition: Testing a random sample of 60 FY 24 non-personal service expenditures charged to the FWC identified two expenditures that lacked proper approval, and one that charged unallowable costs to the FWC. Context: DFG’s primary internal control over financial transactions is knowledgeable DFG staff review of invoices or other supporting documentation to ensure the costs are allowable, supported, coded to the correct program, and within the period of performance. This review is demonstrated by the approver’s signature on the invoice or other supporting documentation authorizing payment. In FY 22, the processing of DFG transactions transitioned to the Department of Administration’s (DOA) centralized Shared Services of Alaska (SSoA). DFG submits invoices with coding and approval to SSoA to initiate processing. According to SSoA procedures, a final verification of coding and approval by departmental administrative services staff prior to SSoA processing is optional. The audit tested a random sample of 60 non-personal services expenditure transactions. Auditors identified two transactions that lacked DFG staff signature authorization. In addition, one transaction approved by DFG staff totaling $206.24 was not allowable due to the costs being for advertising a big game hunt permit raffle. Cause: DFG management attributed the errors to changes in the internal control environment, specifically the shift in non-personal service expenditure input and certification in the accounting system from DFG staff to SSoA staff. Furthermore, management noted that this transition weakened the control processes and emphasized that unauthorized payments should not have been processed by SSoA staff. DFG management also cited DFG staff turnover and inadequate training as a contributing factor. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that a state is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Per Title 50 CFR 80.54, ineligible activities include those conducted for the primary purpose of producing income. Per Title 2 CFR 200.421, the only allowable advertising costs are those which are solely for: staff recruitment, goods and services for the performance of a federal award, disposal of materials acquired in the performance of a federal award, and program outreach (such as recruiting project participants) and other specific purposes necessary to meet federal award requirements. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or miscoded. Furthermore, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including adding reporting requirements or withholding/terminating funding. Questioned Costs: ALN 15.611: $206 Recommendation: DFG’s Division of Administrative Service (DAS) director and Division of Wildlife Conservation director should work together to improve training for DFG staff to ensure expenditures charged to FWC are allowable and properly authorized prior to processing by SSoA staff. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-044 Federal Awarding Agency: USDOI Impact: Material Weakness AL Number and Title: 15.605, 15.611 FWC Federal Award Number: Multiple Applicable Compliance Requirement: Equipment and Real Property Management Condition: Auditors could not obtain sufficient and appropriate evidence to verify compliance with FWC’s equipment and real property management requirements. Context: DFG is responsible for ensuring equipment, real property, and capital improvements, acquired with FWC funds, are used for an authorized purpose, sufficiently tracked, and appropriately disposed of in accordance with federal regulations. In FY 24, DFG staff did not maintain sufficient evidence to demonstrate compliance with equipment and real property management requirements. DFG equipment and real property records did not reliably catalog the universe of equipment, real property, and capital improvements funded with FWC grant monies. Equipment records were incomplete and not trackable by funding source in the accounting system. As a result, the audit was unable to determine the extent of equipment purchased with FWC funds. Real property records had not been reconciled since 2019 and could not be matched with DFG site visit logs. The audit could not identify the FWC assets to be monitored and the extent of site visits conducted during the audit period, and whether the site visits included monitoring for authorized uses. Cause: DFG management attributed the deficiencies to a lack of department-wide procedures, staff turnover, and insufficient training. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 2 CFR 200.311 and Title 50 CFR 80.134 requires the State to use real property for the purpose authorized in the grant for as long as it is needed for that purpose. When real property is no longer needed for the originally authorized purpose, property must be disposed of in accordance with federal requirements. Title 2 CFR 200.313 requires the State to use, manage and dispose of equipment acquired under a federal award in accordance with State laws and procedures. Such equipment must be used for the project or program for which it was acquired and for as long as needed. The State agency must maintain equipment property records, perform physical inventory of equipment, develop a control system, and perform regular maintenance of equipment. Title 50 CFR 80.133 requires the State to maintain acquired or completed capital improvements under FWC grants to ensure that each capital improvement continues to serve its authorized purpose during its useful life. Effect: The lack of department-wide procedures increases the risk that FWC funded assets are not used for authorized purposes and properly disposed of when no longer needed. Inadequate equipment tracking increases the risk of loss or theft. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DFG’s commissioner should ensure procedures are developed and training is implemented so that FWC funded equipment, real property and capital improvements are managed in compliance with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-003 Federal Awarding Agency: U.S. Department of the Treasury (US Treasury) Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Reporting Condition: OMB staff submitted the quarter ended December 31, 2023, FY 24 SLFRF program project and expenditure report to US Treasury with material errors. Context: The SLFRF program project and expenditure reports are filed quarterly. Key line items include current period and cumulative obligations and expenditures for all projects exceeding $50,000. Under an agreed-upon process between OMB and DOF, OMB staff prepared the quarterly report and the DOF state accountant reviewed, certified, and submitted the report in the US Treasury report portal. The audit found that OMB staff submitted the quarter ending December 31, 2023, report directly to US Treasury without review, certification, and submission by the DOF state accountant. The report overstated five projects current period obligations and four projects current period expenditures by $47,668,558 and $47,375,062, respectively. Cause: Auditors noted OMB lacked written procedures for report preparation, review, and submission. OMB staff turnover at the beginning of FY 24 resulted in a lack of understanding of the agreed-upon process for report submission. According to OMB staff, the quarter ending December 31, 2023, report errors were due to a misunderstanding of changes to the US Treasury reporting portal. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 31 CFR 35.4(c) requires the State to submit periodic reports providing detailed accounting of the use of funds and other information that may be required by the Secretary. Effect: Incorrect reports reduce transparency and may impair decision-making. Questioned Costs: None Recommendation: OMB’s director should develop written procedures that outline the process for preparation, review, certification, and submission of federal reports required under the SLFRF program and work with the federal oversight agency to correct errors as needed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-032 Federal Awarding Agency: U.S. Department of the Treasury Impact: Material Weakness, Material Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Subrecipient Monitoring Condition: During FY 24, DCCED staff did not sufficiently monitor the subrecipient tasked with administering the SLFRF Tourism and Other Businesses program. Furthermore, DCCED management did not take action with respect to the subrecipient’s noncompliance with requirements to obtain a single audit. Context: One of the purposes of the federal SLFRF program was to provide funding to address the negative economic impacts of the pandemic. For this purpose, DCCED entered into a contract with a subrecipient to administer $90 million in grants to tourism and other businesses. The contract required the subrecipient to determine eligibility, send payments to eligible businesses, and provide disbursement reports to DCCED for monitoring. This activity created a subrecipient relationship. The audit determined that DCCED’s monitoring of the subrecipient was insufficient on two grounds. 1. DCCED staff did not perform monitoring activities to verify that the subrecipient was correctly determining eligibility, calculating award amounts, or correctly disbursing funds. DCCED staff reviewed reports and participated in meetings regarding issues raised by the subrecipient or participating businesses. However, DCCED staff did not obtain and review detailed FY 24 disbursement reports, or perform a desk review or onsite visit, to verify the subrecipients compliance with SLFRF program requirements. DCCED staff did not reconcile the total amount of funds DCCED advanced to the subrecipient with the total funds disbursed by the subrecipient. 2. Furthermore, DCCED staff did not ensure that the subrecipient obtained a single or program-specific audit. In FY 22 and FY 23 DCCED advanced a total of $77 million to the subrecipient. The Department of Administration, Division of Finance (DOF) compiles the amount of pass-through funds by subrecipient in order to identify and track subrecipients that must obtain a single audit. DOF sent the subrecipient single audit noncompliance letters for FY 22 and FY 23 and added the subrecipient to the State’s “Delinquent Audits” tracking log, which is posted on DOF’s webpage. However, DCCED staff did not verify the subrecipient’s single audit status and took no action to address the noncompliance. The subrecipient did not obtain a single audit for FY 22 and FY 23. Cause: DCCED lacked resources in its Division of Community and Regional Affairs to administer the SLFRF program. As a result, the program was administered by staff within the Commissioner’s Office that lacked adequate training, knowledge, and experience to administer a federal pass-through program. Consequently, DCCED staff administering the program were not fully aware of federal subrecipient monitoring requirements. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(d) requires pass-through entities to monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with statutes, regulations, and the terms and conditions of the subaward. The amount of monitoring should be commensurate with the subrecipient’s fraud risk and risk of noncompliance. Title 2 CFR 200.332(f) requires pass-through entities to verify that a subrecipient is audited as required by Uniform Guidance Subpart F - Audit. When a subrecipient is noncompliant with the single audit requirement, Title 2 CFR 200.505 states that pass-through entities "must take appropriate action." Authorized action includes withholding payments from the subrecipient or terminating the grant per Title 2 CFR 200.339. Effect: Inadequate subrecipient monitoring increases the risk of subrecipient noncompliance with federal statutes, regulations, and the terms and conditions of a program. Subrecipient noncompliance with the terms and conditions of the federal award could result in the State having to repay SLFRF monies to the federal government. Questioned Costs: None Recommendation: DCCED’s commissioner should ensure compliance with federal subrecipient monitoring requirements through adoption of written procedures and staff training. Furthermore, the commissioner should ensure the SLFRF subrecipient obtains single or program-specific audits for all required fiscal years. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-003 Federal Awarding Agency: U.S. Department of the Treasury (US Treasury) Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Reporting Condition: OMB staff submitted the quarter ended December 31, 2023, FY 24 SLFRF program project and expenditure report to US Treasury with material errors. Context: The SLFRF program project and expenditure reports are filed quarterly. Key line items include current period and cumulative obligations and expenditures for all projects exceeding $50,000. Under an agreed-upon process between OMB and DOF, OMB staff prepared the quarterly report and the DOF state accountant reviewed, certified, and submitted the report in the US Treasury report portal. The audit found that OMB staff submitted the quarter ending December 31, 2023, report directly to US Treasury without review, certification, and submission by the DOF state accountant. The report overstated five projects current period obligations and four projects current period expenditures by $47,668,558 and $47,375,062, respectively. Cause: Auditors noted OMB lacked written procedures for report preparation, review, and submission. OMB staff turnover at the beginning of FY 24 resulted in a lack of understanding of the agreed-upon process for report submission. According to OMB staff, the quarter ending December 31, 2023, report errors were due to a misunderstanding of changes to the US Treasury reporting portal. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 31 CFR 35.4(c) requires the State to submit periodic reports providing detailed accounting of the use of funds and other information that may be required by the Secretary. Effect: Incorrect reports reduce transparency and may impair decision-making. Questioned Costs: None Recommendation: OMB’s director should develop written procedures that outline the process for preparation, review, certification, and submission of federal reports required under the SLFRF program and work with the federal oversight agency to correct errors as needed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-032 Federal Awarding Agency: U.S. Department of the Treasury Impact: Material Weakness, Material Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Subrecipient Monitoring Condition: During FY 24, DCCED staff did not sufficiently monitor the subrecipient tasked with administering the SLFRF Tourism and Other Businesses program. Furthermore, DCCED management did not take action with respect to the subrecipient’s noncompliance with requirements to obtain a single audit. Context: One of the purposes of the federal SLFRF program was to provide funding to address the negative economic impacts of the pandemic. For this purpose, DCCED entered into a contract with a subrecipient to administer $90 million in grants to tourism and other businesses. The contract required the subrecipient to determine eligibility, send payments to eligible businesses, and provide disbursement reports to DCCED for monitoring. This activity created a subrecipient relationship. The audit determined that DCCED’s monitoring of the subrecipient was insufficient on two grounds. 1. DCCED staff did not perform monitoring activities to verify that the subrecipient was correctly determining eligibility, calculating award amounts, or correctly disbursing funds. DCCED staff reviewed reports and participated in meetings regarding issues raised by the subrecipient or participating businesses. However, DCCED staff did not obtain and review detailed FY 24 disbursement reports, or perform a desk review or onsite visit, to verify the subrecipients compliance with SLFRF program requirements. DCCED staff did not reconcile the total amount of funds DCCED advanced to the subrecipient with the total funds disbursed by the subrecipient. 2. Furthermore, DCCED staff did not ensure that the subrecipient obtained a single or program-specific audit. In FY 22 and FY 23 DCCED advanced a total of $77 million to the subrecipient. The Department of Administration, Division of Finance (DOF) compiles the amount of pass-through funds by subrecipient in order to identify and track subrecipients that must obtain a single audit. DOF sent the subrecipient single audit noncompliance letters for FY 22 and FY 23 and added the subrecipient to the State’s “Delinquent Audits” tracking log, which is posted on DOF’s webpage. However, DCCED staff did not verify the subrecipient’s single audit status and took no action to address the noncompliance. The subrecipient did not obtain a single audit for FY 22 and FY 23. Cause: DCCED lacked resources in its Division of Community and Regional Affairs to administer the SLFRF program. As a result, the program was administered by staff within the Commissioner’s Office that lacked adequate training, knowledge, and experience to administer a federal pass-through program. Consequently, DCCED staff administering the program were not fully aware of federal subrecipient monitoring requirements. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(d) requires pass-through entities to monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with statutes, regulations, and the terms and conditions of the subaward. The amount of monitoring should be commensurate with the subrecipient’s fraud risk and risk of noncompliance. Title 2 CFR 200.332(f) requires pass-through entities to verify that a subrecipient is audited as required by Uniform Guidance Subpart F - Audit. When a subrecipient is noncompliant with the single audit requirement, Title 2 CFR 200.505 states that pass-through entities "must take appropriate action." Authorized action includes withholding payments from the subrecipient or terminating the grant per Title 2 CFR 200.339. Effect: Inadequate subrecipient monitoring increases the risk of subrecipient noncompliance with federal statutes, regulations, and the terms and conditions of a program. Subrecipient noncompliance with the terms and conditions of the federal award could result in the State having to repay SLFRF monies to the federal government. Questioned Costs: None Recommendation: DCCED’s commissioner should ensure compliance with federal subrecipient monitoring requirements through adoption of written procedures and staff training. Furthermore, the commissioner should ensure the SLFRF subrecipient obtains single or program-specific audits for all required fiscal years. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-084 Federal Awarding Agency: NASA and USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 43.001, 93.859 RDC Federal Award Number: 80NSSC22K0579, P20GM103395 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: Two of the sampled 40 covered transactions did not have checks for suspension or debarment with the external parties prior to entering the contract. Context: During the testing of suspension and debarment, two grants from the UAF campus had covered transactions, one a subrecipient and another a procurement transaction, that did not have evidence federal excluded parties list system checks were performed prior to entering into the covered transaction. Cause: UAF did not perform timely review of suspension and debarment listings prior to entering into a covered transaction. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Potentially suspended or debarred vendor may have been contracted by the University for a covered transaction. Questioned Costs: None Recommendation: UAF management should perform suspension and debarment checks on all covered transactions paid with federal funds. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-083 Prior Year Finding: Federal Awarding Agency: National Science Foundation Impact: Significant Deficiency AL Number and Title: 47.076 RDC Federal Award Number: 1839290 Applicable Compliance Requirement: Period of Performance Condition: One of 40 sampled transactions were coded incorrectly to the wrong grant. Context: During testing of period of performance, one transaction was observed that appeared to have been liquidated beyond 120 days after the end of the period of performance. Upon further inspection, we concluded that the transaction was coded to the incorrect grant. The correct grant was still within the 120-day liquidation period after the end of the period of performance. Cause: UAF did not perform timely close out procedures on the grant which resulted in incorrectly coded expenditures to go undetected. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: One transaction was incorrectly coded to the wrong grant. Questioned Costs: None Recommendation: UAF management should adhere to their existing requirements for timely grant close out procedures. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-085 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.031 Higher Education Institutional Aid Federal Award Number: P031R210002-23 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: One sample of five grants with level of effort provisions in the grant award notification did not meet the level of effort for key personnel required by the federal agency. Context: During testing of special tests and provisions one grant of a sample of five from UAF was observed to not have met level of effort requirements as stipulated in the award documents. The campus had inadvertently submitted an incorrect budget with different key personnel to the agency and did not correct this with the federal agency upon receipt of the award documents stipulating the incorrect key personnel. Cause: An incorrect budget was submitted with the grant proposal to the Federal agency. Criteria: Per 2 CFR 200.308(f)(3) the Federal Government required a recipient of federal awards must receive prior written approval from the Federal agency for the disengagement of key personnel from a project for more than three months, or a 25% reduction in time and effort devoted to the Federal award. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: Key personnel listed in the award documents did not have time and effort tracked towards the grant project. Questioned Costs: None Recommendation: UAF management should continue to review budgets and key personnel submitted with grant proposals to Federal agencies. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-028 Federal Awarding Agency: U.S. Department of Education Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425 Education Stabilization Fund – COVID-19 Federal Award Number: S425U210020 Applicable Compliance Requirement: Reporting Condition: The Elementary and Secondary School Emergency Relief fund (ESSER) annual report filed by DEED in May 2024 was submitted with incomplete subrecipient expenditure data for key line item 3b.1. Context: ESSER funding is broken out into three different groups: ESSER I, ESSER II and American Rescue Plan (ARP) ESSER. Over 75% of total Education Stabilization Fund expenditures incurred in FY 23 for reporting in FY 24 were grants to subrecipients from ARP ESSER funding. State education agencies are to report on line 3b.1 subaward information, including which agencies received subawards and the funds allocated for and incurred by expenditure category. DEED staff submitted the ARP ESSER amounts awarded to grantees as part of the annual report; however subrecipient expenditure fields were submitted with zeros. Cause: According to DEED management, subrecipients were unresponsive to requests for information and staff assigned to prepare the report had competing priorities and insufficient time. In addition, management reviewed and submitted the report with known errors. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 34 CFR 76.720 requires states to submit reports required for monitoring and continuous improvement and other reports required by the Secretary and approved by the US Office of Management and Budget (OMB). State education agencies are required by the Secretary to submit an annual performance report (OMB No. 1810-0749) with data on subrecipients, state education agencies and subrecipient expenditures, planned expenditures, and uses of funds. Grant Award Notification S425U210020 Attachment T: Grant Conditions: Part A 13. The state education agencies will comply with, and ensure that local education agencies comply with, all reporting requirements at such time and in such manner and containing such information as the Secretary may reasonably require. Effect: Inaccurate federal reporting reduces transparency and may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DEED's Innovation and Education Excellence division director should allocate sufficient staff resources to prepare the ESSER annual report and strengthen report review and approval controls to ensure compliance with annual reporting requirements. Views of Responsible Officials: The department partially disagrees with Finding 2024-028. While it is true that the department did initially report zeros in the LEA portion of ESSER III reporting it is untrue that the effect was a reduction in transparency or impaired the federal agency’s oversight ability. No ESSER annual reporting can be submitted if all entered answers do not conform to implemented data validations requirements. Relevant in this instance is that if district level data reported does not match, to the penny, between different reporting categories, data validation errors occur. Including zeros, when accurate data conforming to data validation checks was not able to be entered, allowed the department to enter the data accurately during the first reporting reopen period. Had the department not entered zeros, data validation errors would have prevented the department from submitting the entire FY2023 ESSER annual report. If no report had been entered as of the initial due date the department would not have been allowed to submit any report at all, which would be less accurate than temporary partial inaccuracy. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for timely and accurate submission of federal reports and should allocate sufficient resources and strengthen controls to ensure compliance with federal reporting requirements.

Finding No. 2024-056 Prior Year Finding: 2023-038 Federal Awarding Agency: United States Department of Health and Human Service (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility Condition: Three of 60 TANF recipient case files tested lacked adequate documentation to indicate that the participant met all eligibility criteria. The following errors were noted: • Two cases exceeded the 60-month benefit limit, which resulted in excess benefits. • One case lacked documentation to verify one parent's relational status to the children. Additionally, seven of 60 cases tested had documentation to support individual's eligibility, but lacked sufficient documentation to verify that the key control over compliance occurred. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. The State reviews applications, identifies income and financial resources, and makes a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, the State’s Income Eligibility and Verification System (IEVS), unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. The State’s TANF manual provides guidance on how to calculate income. Once the information is received, reviewed, and calculated, it is entered into the EIS. EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly. DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of eligibility determinations and not accurately terminating benefit amounts. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 45 CFR 264.1 stipulates that no State may provide assistance to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Effect: Ineligible recipients may have received benefits. Questioned Costs: AL 93.558: $ 5,720 (known questioned costs); $ 173,417 (likely questioned costs) Recommendation: DOH management should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-057 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Insufficient documentation was available to support the manual transfer of time originally coded to another federal program to the TANF program. Context: In a statistically valid sample, two of sixty selections showed time coded to the employee’s time sheet for the Low-Income Home Energy Assistance Program (LIHEAP) that was later manually transferred to TANF. During the audit, a verbal explanation was given that this was done for budgetary reasons, as they are similar activities that can be coded to both LIHEAP and TANF. However, there was insufficient documentation to support that the transferred time was reasonable under the TANF program. Both of the deficient selections were for the same employee. Cause: Inadequate understanding of the documentation needed to support manual adjustments to payroll. Criteria: Per 2 CFR 200.430, costs of compensation are allowable to the extent that they are reasonable for the services rendered and conform to the established written policy of the recipient or subrecipient and meet the standards for documentation of personnel expenses, as outlined in 200.430(g). Effect: Unallowable costs may lead to potential penalties, increased audit scrutiny, distorted indirect cost rates, and the need to repay funds. Questioned Costs: AL 93.558: $1,730 Recommendation: DOH management should improve documentation kept to support manual interference with payroll costs. Views of Responsible Officials: The department does not agree with the finding. The Division of Public Assistance (DPA) met with CLA regarding the questioned costs which were explained and documented. For the sample selected, the employee did positive time keep to LDP U6615 - LIHEAP Policy for their time spent processing heating assistance applications. This was during a time when our Policy section was understaffed, and the administrative section absorbed programmatic duties. The division followed the State of Alaska’s payroll correction process. When IRIS-HRM (payroll) interfaced to IRIS-FIN (financial), the payroll transactions errored due to insufficient program budget. The Department of Administration, Division of Finance provides an erroring payroll transaction report. The departments are instructed to update the report with correct financial coding and send to a BOT email address. The BOT enters the correction in the State’s financial system and attaches the spreadsheet to document the update in coding. Department staff do not have permissions to add notes or additional attachments to the payroll transaction. DPA accounting staff reviewed the errored transaction and identified another allowable fund source to code these expenditures to. Therefore, the payroll expenses were adjusted and charged to the TANF program. Auditor’s Concluding Remarks: Cost transfers must be sufficiently documented in accordance with the provisions of the Office of Management and Budget (“OMB”) as part of 2 CFR Part 200, Subpart E (Uniform Guidance). Under the Uniform Guidance, costs must meet the following conditions: • Be necessary and reasonable for the performance of the award and be allocable to the award; • Be allowable (the cost is allowed by federal regulations, sponsor terms and conditions, including program specific requirements); • Treated consistently (a cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost); • Be adequately documented. The Uniform Guidance also states that any cost allocable to a federal award may not be charged to other federal awards to overcome fund deficiencies, to avoid restrictions imposed by regulations of terms and conditions of the federal award, or for other reasons. The auditor concluded that DPA did not have adequate documentation to support the activities the employee provided to the TANF program were allowable.

Finding No. 2024-058 Prior Year Finding: 2023-039 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: Auditors could not obtain reliable evidence to verify compliance with TANF’s level of effort and earmarking requirements. Context: The State was unable to provide documentation to show how the State was monitoring the level of effort and earmarking requirements throughout the year. This monitoring is normally done as a part of reporting for the program. Cause: Level of effort and earmarking assessment is done through the ACF-204 reporting process. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. The State’s DOH lacked adequate monitoring procedures, primarily due to turnover and staffing shortages. Criteria: Title 45 CFR 263 states that a state must maintain an amount of “qualified state expenditures” for eligible families at least at the applicable percentage of the state’s historic state expenditures. It also states that a state may not spend more than 15 percent for administrative purposes, excluding certain types of expenditures, of the total combined amounts available. Title 45 CFR 264.72 requires a state to spend more than 100 percent of its historic state expenditures for FY 1994 to keep any of the federal contingency funds it received. Title 45 CFR 264.1 states that the average monthly number of families that include an adult head-of-household or a spouse of the head-of-household who has received federal assistance for a total of five years (60 countable months, whether or not consecutive) may not exceed 20 percent of the average monthly number of all families to which the state has provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the state may elect. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Lack of monitoring level of effort and earmarking requirements creates a risk that unallowable benefits were paid. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits. Questioned Costs: None Recommendation: DOH management should develop procedures to ensure that monitoring procedures are in place for level of effort and earmarking. This may include allocating resources to correct the supporting documentation used to monitor these requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-059 Prior Year Finding: 2023-040 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting, Special Tests and Provisions Condition: One of the 60 cases tested had insufficient documentation to verify work hours which resulted in these work activities being reported inaccurately in the ACF-199 report. Context: The State reports the work verification data through the quarterly ACF-199 reports. The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. One of cases tested had insufficient documentation to verify work hours. Case notes referenced a submitted TA-10 form, however the document was unable to be found for audit purposes. All other elements of compliance were supported. Cause: According to DPA management, the division continues to work through the backload associated with the public health emergency and continues to experience staffing shortages. This has adversely affected DPA resources and impacted the ability to meaningfully execute the corrective action plan. Criteria: Per the 2024 Office of Management and Budget (OMB) Compliance Supplement, "the state agency must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of the data used in calculating work participation rates." Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 265.7(a) requires each state’s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems. Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual’s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: The State could be subject to a penalty if reported data is not supported by accurate documentation. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure supporting documentation is complete to support data reported on the ACF-199. This may require increased resources and training. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-060 Prior Year Finding: 2023-042 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting Condition: No Federal Funding and Transparency Act (FFATA) reports were submitted during the audit period of July 1, 2023 through June 30, 2024. Additionally, the State could not provide evidence that the FFY 23 ACF-204 annual report was completed or submitted to the federal agency. Context: FFATA reports related to 13 subrecipients were not filed during the audit period. Payments to subrecipients total $2,951,541.10 in the audit period. The State must complete and file an annual report containing information on the TANF program and the State’s maintenance of effort programs for that year. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. Cause: TANF program management was split between two State departments: DOH and the Department of Community Services (DFCS). Due to the transition, these subrecipients were administered under a reimbursable service agreement and bypassed the necessary flag for reporting. It was unclear which department was responsible for FFATA reporting, resulting in the reports not being filed by either department. DOH experienced staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements for submitting an annual ACF-204 report. Criteria: Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state’s maintenance of effort program(s) for that year. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit reports results in noncompliance with FFATA. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Questioned Costs: None Recommendation: DOH management should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed maintenance of effort expenditures. The State should clearly identify and communicate to the parties responsible for FFATA reporting. The State should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-061 Federal Awarding Agency: USDHHS Impact: Material Weakness, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Each state shall participate in IEVS required by Section 1137 of the Social Security Act as amended. Fifteen of 60 cases tested lacked adequate documentation to indicate if all components of income verification were gathered and processed correctly. Context: In a statistically valid sample, fifteen of 60 cases tested lacked adequate documentation to indicate if all components of income verification were gathered and processed correctly. Of the deficient cases (note, some cases had multiple deficiencies): • Two of 15 cases lacked evidence to show that the state was using EIS to determine eligibility in accordance with the state plan. • Eight of 15 cases lacked evidence to show the state requested and obtained income verification data from State Wage Information Collection Agency, State unemployment agency, SSA, U.S. Citizenship and Immigration Services, and unearned income from IRS located in the EIS system. • Seven of 15 cases did not have evidence that the management-level pre-authorization review was performed nor that the individual making determinations for the case signed and authorized each step within EIS. Although 15 cases had deficient documentation, each case had some form of income verification documented, implying that all participants would likely have been determined to be eligible if all appropriate steps were taken and all required documentation kept. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of IEVS verification. Criteria: Each state shall participate in the IEVS required by Section 1137 of the Social Security Act as amended. Effect: USDHHS may penalize a state for up to 2 percent of the State Family Assistance Grant for failure to participate in IEVS (42 USC 609(a)(4) and 1320b-7; 45 CFR sections 264.10 and 264.11). Questioned Costs: None Recommendation: DOH management should improve training and supervision to ensure all elements of IEVS determination are performed and adequate documentation is kept. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-062 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Per the 2024 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Two of seven non-cooperative cases tested lacked appropriate documentation to support "waived" penalties. Context: In a statistically valid sample, two of seven non-cooperative cases tested lacked appropriate documentation to support “waived” penalties. For both of these, there was no child support information through Appendix D of the application, yet the penalty was "waived" in EIS and not applied to payments. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of child support non-cooperation provisions. Criteria: Per the 2024 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Effect: USDHHS may penalize a state for up to five percent of the State Family Assistance Grant for failure to substantially comply with this required state child support program (42 USC 608(a)(2) and 609(a)(8); 45 CFR sections 264.30 and 264.31). Questioned Costs: AL 93.558: $ 4,167 Recommendation: DOH management should improve training and supervision to ensure child support noncooperation penalties are appropriately applied. If a penalty is determined to be unapplicable, adequate documentation should be kept to support that determination. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-025 Federal Awarding Agency: U.S. Department of Health and Human Services Impact: Significant Deficiency AL Number and Title: 93.563 Child Support Services (CSS) Federal Award Number: 2001AKCSES, 2201AKCSES Applicable Compliance Requirement: Cash Management Condition: DOR staff processed an FY 24 CSS federal cash draw that was inadequately supported at the time of the draw. Context: The Child Support Enforcement Division’s (CSED) policy is to draw federal funds on a reimbursement basis to ensure compliance with federal cash management regulations. DOR draws are typically supported by receivables that are automatically generated by the State’s accounting system based on the draw periods expenditure transactions. DOR staff performed six cash drawdowns during FY 24 totaling $16.6 million, of which the audit tested three totaling $8.7 million. Of the three cash draws tested, one cash draw for $2.6 million (30 percent of the total tested), that processed in September 2023, was not supported by expenditures in the State’s accounting system. The unsupported draw was manually generated based on the remaining undrawn balance in two prior year federal awards – federal fiscal year 2020 and 2022. DOR management reports CSS expenditures to the federal oversight agency through a quarterly reporting process. According to DOR management, flawed revenue accounting and cash management processes in prior years resulted in revenue shortfalls. DOR management stated the September 2023 draw was intended to correct the shortfall and reimburse the State for expenditures reported to the federal oversight agency under prior year federal awards that were never claimed for reimbursement. DOR management could not provide auditors evidence of expenditures recorded in the State’s accounting system to support the drawn amount until five months after the support was requested. Cause: The lack of support for the draw was due to inadequate cash management procedures including the absence of review by an individual other than the preparer of the draw request. Furthermore, DOR management asserted that weaknesses in the methodology used for drawing federal funds in prior years created an imbalance between program expenditures and revenues that carried forward to FY 24. Criteria: Title 45 CFR 75.302(b)(6) requires the State to establish written procedures to implement the requirements for federal payments to states. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Inadequate internal controls resulted in the unsupported drawdown of federal funds and an increased risk of noncompliance with federal regulations. Questioned Costs: None Recommendation: DOR’s CSED and DAS directors should develop written cash management procedures to ensure federal expenditure reimbursement requests are supported by the State’s accounting records at the time of the draw. Furthermore, DOR management should complete a reconciliation of CSS program expenditures and revenues in the State’s accounting system and resolve all uncleared receivables and cash receipts. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-063 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 Child Care and Development Fund Cluster (CCDF) Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Eligibility Condition: The State lacked sufficient documentation, as outlined in the federal requirements and the state plan, to clearly document what services one child was receiving and if they were authorized for services during the period under audit. Context: In a statistically valid sample, one of 60 case files tested lacked sufficient documentation. The one negligent file did adequately support that the child was approved to receive CCDF services, but it was unclear if those services were authorized to continue during the period under audit. Cause: The deficiency was due to inconsistent understanding of what is considered adequate case notes/file documentation. Criteria: Per the 2024 OMB Compliance Supplement, "Lead Agencies must have procedures in place for documenting and verifying eligibility in accordance with …federal requirements, as well as the specific eligibility requirements elected by each Lead Agency in its approved plan." Effect: Failure to accurately document eligibility decisions could result in benefits provided to applicants who are ineligible for CCDF services. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst case workers on the importance of clear documentation and should increase the review of case files to ensure documentation is adequate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-064 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Reporting Condition: Five of five ACF-696 quarterly reports and three of five FFATA reports selected for testing were submitted after the required due dates. Context: All five ACF-696 quarterly reports tested were submitted later than 30 days after quarter end. Delayed submissions ranged from two to eleven months. Three of five FFATA reports tested were not submitted timely. Delays ranged from four months late to nine months late. Subaward amounts that were not reported timely total $4,382,068.61. Cause: Turnover and staffing shortages amongst staff responsible for reporting and delayed communication between departments who approve awards and those who prepare and submit reports contributed to delayed report submissions. Criteria: Title 45 CFR 98.65(g) requires the State to submit financial reports, in a manner specified by ACF. These reports must be submitted quarterly and are due 30 days after quarter-end. Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Per review of the 2024 OMB Compliance Supplement, reports must be submitted in FSRS "no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made." Effect: The State could be penalized for failing to substantially comply with reporting requirements. Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit timely FFATA reports results in noncompliance with Federal Funding Accountability and Transparency Act. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure all reports are prepared, reviewed, and submitted timely. Specific to FFATA, management should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-065 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Special Tests and Provisions Condition: The State developed a sufficient state plan outlining appropriate procedures for ensuring child care providers serving children who receive subsidies are compliant with relevant health and safety requirements. However, one of 27 selections lacked documentation to adequately support that all controls, as outlined in the state plan, were fully followed. Context: In a statistically valid sample, one of 27 selections had compliance deficiencies related to State created provisions. The deficient selection had adequate documentation to show that the required monitoring checklist had been partially complete during the required annual facility inspection, however significant portions of the checklist were left blank, leading to concern that the inspector may not have thoroughly reviewed all health and safety compliance requirements. Cause: The deficiency was due to inconsistent application of internal processes for completing and documenting facility inspections. Criteria: Per 42 USC 9858c(c)(2)(I) and 45 CFR section 98.41, Lead Agencies must ensure that child care providers serving children who receive subsidies meet applicable health and safety requirements. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Subsidies could be paid to child care providers who do not meet health and safety requirements, which could put children under their care in unsafe conditions. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst staff that perform health and safety inspections. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-063 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 Child Care and Development Fund Cluster (CCDF) Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Eligibility Condition: The State lacked sufficient documentation, as outlined in the federal requirements and the state plan, to clearly document what services one child was receiving and if they were authorized for services during the period under audit. Context: In a statistically valid sample, one of 60 case files tested lacked sufficient documentation. The one negligent file did adequately support that the child was approved to receive CCDF services, but it was unclear if those services were authorized to continue during the period under audit. Cause: The deficiency was due to inconsistent understanding of what is considered adequate case notes/file documentation. Criteria: Per the 2024 OMB Compliance Supplement, "Lead Agencies must have procedures in place for documenting and verifying eligibility in accordance with …federal requirements, as well as the specific eligibility requirements elected by each Lead Agency in its approved plan." Effect: Failure to accurately document eligibility decisions could result in benefits provided to applicants who are ineligible for CCDF services. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst case workers on the importance of clear documentation and should increase the review of case files to ensure documentation is adequate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-064 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Reporting Condition: Five of five ACF-696 quarterly reports and three of five FFATA reports selected for testing were submitted after the required due dates. Context: All five ACF-696 quarterly reports tested were submitted later than 30 days after quarter end. Delayed submissions ranged from two to eleven months. Three of five FFATA reports tested were not submitted timely. Delays ranged from four months late to nine months late. Subaward amounts that were not reported timely total $4,382,068.61. Cause: Turnover and staffing shortages amongst staff responsible for reporting and delayed communication between departments who approve awards and those who prepare and submit reports contributed to delayed report submissions. Criteria: Title 45 CFR 98.65(g) requires the State to submit financial reports, in a manner specified by ACF. These reports must be submitted quarterly and are due 30 days after quarter-end. Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Per review of the 2024 OMB Compliance Supplement, reports must be submitted in FSRS "no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made." Effect: The State could be penalized for failing to substantially comply with reporting requirements. Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit timely FFATA reports results in noncompliance with Federal Funding Accountability and Transparency Act. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure all reports are prepared, reviewed, and submitted timely. Specific to FFATA, management should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-065 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Special Tests and Provisions Condition: The State developed a sufficient state plan outlining appropriate procedures for ensuring child care providers serving children who receive subsidies are compliant with relevant health and safety requirements. However, one of 27 selections lacked documentation to adequately support that all controls, as outlined in the state plan, were fully followed. Context: In a statistically valid sample, one of 27 selections had compliance deficiencies related to State created provisions. The deficient selection had adequate documentation to show that the required monitoring checklist had been partially complete during the required annual facility inspection, however significant portions of the checklist were left blank, leading to concern that the inspector may not have thoroughly reviewed all health and safety compliance requirements. Cause: The deficiency was due to inconsistent application of internal processes for completing and documenting facility inspections. Criteria: Per 42 USC 9858c(c)(2)(I) and 45 CFR section 98.41, Lead Agencies must ensure that child care providers serving children who receive subsidies meet applicable health and safety requirements. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Subsidies could be paid to child care providers who do not meet health and safety requirements, which could put children under their care in unsafe conditions. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst staff that perform health and safety inspections. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-082 Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.859 RDC Federal Award Number: 5P20GM103395-23 Applicable Compliance Requirement: Equipment and Real Property Management Condition: One of the 40 sampled equipment had a lapse of greater than two years between physical inventories. Context: During the testing of equipment for real property management, one item of equipment was found to have an interval between physical inventories that was greater than two years. Inventory for this equipment was taken May 7, 2021, then again June 4, 2024. Cause: University of Alaska Anchorage (UAA) had a loss of information regarding compliance requirements through employee turnover at the responsible department level. Criteria: Per 2 CFR 200.313(d)(2), a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The equipment was not inventoried within the two-year timeframe. Questioned Costs: None Recommendation: UAA management should ensure proper policies and procedures are in place to monitor capital asset inventory observations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-084 Federal Awarding Agency: NASA and USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 43.001, 93.859 RDC Federal Award Number: 80NSSC22K0579, P20GM103395 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: Two of the sampled 40 covered transactions did not have checks for suspension or debarment with the external parties prior to entering the contract. Context: During the testing of suspension and debarment, two grants from the UAF campus had covered transactions, one a subrecipient and another a procurement transaction, that did not have evidence federal excluded parties list system checks were performed prior to entering into the covered transaction. Cause: UAF did not perform timely review of suspension and debarment listings prior to entering into a covered transaction. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Potentially suspended or debarred vendor may have been contracted by the University for a covered transaction. Questioned Costs: None Recommendation: UAF management should perform suspension and debarment checks on all covered transactions paid with federal funds. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4646DRAKP00000001, 4667DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 25 FY 24 Disaster Grants payments found that 14 payments (56 percent) lacked required supporting documentation. Specifically, six payments lacked pay policy and/or fringe benefit calculations and eight payments lacked procurement contracts that included all federal requirements. Additionally, two of the eight payments lacked a complete or signed contract on file. Context: The Federal Emergency Management Agency (FEMA) reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. The applicant is required to submit the following documentation to support labor costs claimed: summary of actual costs for completed work, individual information (such as name, job title, type of employee, days and hours worked, pay rate and fringe benefit rate, and a description of work performed), fringe benefit calculation, and pay policy. FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s pre-disaster written pay policy. Six of the 25 transactions included force account labor that was not supported by a pay policy or benefit calculation. FEMA provides public assistance funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contracting requirements. The applicant must include required provisions detailed in Title 2 CFR 200.327 in all contracts awarded and maintain oversight to ensure that contractors perform according to the conditions and specifications of the contract. FEMA reimburses funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contract requirements. Eight of the 25 transactions included contractor payments and, based on review of the contract, not all federally required provisions were included. Two of the eight were not supported by a signed contract. According to DMVA management, contractors were utilized to provide project management of the federal disasters due to an increased workload and a lack of available DMVA staff. Contractors were tasked with gathering the required documents to ensure projects were administered in accordance with FEMA requirements. Cause: Division of Homeland Security and Emergency Management (DHSEM) lacked written procedures for monitoring contractors. Also, due to staff turnover and an increase in workload, DHSEM management did not adequately monitor contractor’s work. Specifically, to ensure the contractor verified the contracts awarded by subrecipients included federal requirements, final signed contracts were provided to the state, and required documentation was received for the reimbursement of subrecipient force account labor costs. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), 2018, which requires labor costs to be supported by specific documentation: summary of actual costs for completed work; for each individual: name, job title and function, type of employee, days and hours worked, pay rates and fringe benefit rate, and description of work performed; fringe benefit calculations; and pay policy. The PAPPG also requires contracts to include the required provisions in Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses in all contracts awarded. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Lack of fringe benefit calculations and pay policy may result in FEMA limiting public assistance funding to the applicant non-discretionary, uniformly applied pay rates. Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: AL - 97.036: $96,758 AL - 97.036 COVID-19: $2,159 Recommendation: DHSEM’s director should develop written procedures for adequately monitoring DMVA contractors to ensure all federally required documentation is obtained to support reimbursements to subrecipients. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-039 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Four of 12 randomly selected FY 24 Disaster Grants SF-425 reports tested had incorrect matching amounts, one of which also had an incorrect recipient share of expenditures. Context: The SF-425 is a required quarterly federal financial form used for reporting the financial status of federal grant awards. During FY 24, 15 disasters required quarterly SF-425 reports for a total of 58 reports filed. Twelve of the 58 were selected for testing. Due to incorrect calculations, the matching amounts for four reports were understated. One report also reported incorrect recipient share of expenditures. Cause: The errors were due to insufficient procedures over the preparation and review of SF-425 reports. Criteria: Title 44 CFR 206.120(f)(2) prescribes the State shall provide financial status reports. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: The insufficient internal controls resulted in misreported financial data. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DMVA's finance officer should strengthen written procedures for the preparation and review of the SF-425 report to ensure the reports submitted to FEMA are accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-040 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4646DRAKP00000001, 4648DRAKP00000001, 4667DRAKP00000001, 4672DRAKP00000001, 4585DRAKP00000001, 4730DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in FY 24 Disaster Grants program subawards key data elements in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Additionally, the names and total compensation of each of the subrecipient’s five most highly compensated executives, if applicable, were not communicated to DMVA’s DAS staff for data entry into FSRS. Context: The FFATA was signed into law on September 26, 2006, with the intent to empower every American with the ability to hold the government accountable for each spending decision. The FFATA legislation requires information on federal awards be made available to the public via a single, searchable website, at www.usaspending.gov. The FFATA FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. To comply with FFATA requirements, DHSEM staff responsible for Disaster Grants program management obtain subawardee information from the OAD and the assurances and agreement document. The OAD is sent to DAS staff for data entry into FSRS. There were 86 Disaster Grants program subawards subject to FFATA reporting during FY 24. The audit reviewed seven randomly and two judgmentally selected subawards, totaling $6,819,071, for compliance and internal controls testing of FFATA reporting requirements. One of the seven (14 percent) subawards, totaling $1,625,735, reported an incorrect subaward project description and three (43 percent) subawards, totaling $369,218, were not reported timely. One judgmentally selected subaward, totaling $164,393, was not reported timely to FSRS, and one, totaling $4,009,660, was not reported at all. An additional 48 subawards were not reported that should have been. Reporting errors are summarized in the table below. Cause: Staff turnover and vacancies contributed to the errors and omissions. Inadequate procedures resulted in highly compensated executive salaries not being communicated to DAS staff. Since the data was entered directly into FSRS, DAS staff stated the system did not allow for review by a supervisor to ensure accuracy of the data prior to submission. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's finance officer should work with the DHSEM director to strengthen FFATA reporting procedures to ensure required reports are filed timely and key data elements comply with federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4646DRAKP00000001, 4667DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 25 FY 24 Disaster Grants payments found that 14 payments (56 percent) lacked required supporting documentation. Specifically, six payments lacked pay policy and/or fringe benefit calculations and eight payments lacked procurement contracts that included all federal requirements. Additionally, two of the eight payments lacked a complete or signed contract on file. Context: The Federal Emergency Management Agency (FEMA) reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. The applicant is required to submit the following documentation to support labor costs claimed: summary of actual costs for completed work, individual information (such as name, job title, type of employee, days and hours worked, pay rate and fringe benefit rate, and a description of work performed), fringe benefit calculation, and pay policy. FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s pre-disaster written pay policy. Six of the 25 transactions included force account labor that was not supported by a pay policy or benefit calculation. FEMA provides public assistance funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contracting requirements. The applicant must include required provisions detailed in Title 2 CFR 200.327 in all contracts awarded and maintain oversight to ensure that contractors perform according to the conditions and specifications of the contract. FEMA reimburses funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contract requirements. Eight of the 25 transactions included contractor payments and, based on review of the contract, not all federally required provisions were included. Two of the eight were not supported by a signed contract. According to DMVA management, contractors were utilized to provide project management of the federal disasters due to an increased workload and a lack of available DMVA staff. Contractors were tasked with gathering the required documents to ensure projects were administered in accordance with FEMA requirements. Cause: Division of Homeland Security and Emergency Management (DHSEM) lacked written procedures for monitoring contractors. Also, due to staff turnover and an increase in workload, DHSEM management did not adequately monitor contractor’s work. Specifically, to ensure the contractor verified the contracts awarded by subrecipients included federal requirements, final signed contracts were provided to the state, and required documentation was received for the reimbursement of subrecipient force account labor costs. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), 2018, which requires labor costs to be supported by specific documentation: summary of actual costs for completed work; for each individual: name, job title and function, type of employee, days and hours worked, pay rates and fringe benefit rate, and description of work performed; fringe benefit calculations; and pay policy. The PAPPG also requires contracts to include the required provisions in Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses in all contracts awarded. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Lack of fringe benefit calculations and pay policy may result in FEMA limiting public assistance funding to the applicant non-discretionary, uniformly applied pay rates. Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: AL - 97.036: $96,758 AL - 97.036 COVID-19: $2,159 Recommendation: DHSEM’s director should develop written procedures for adequately monitoring DMVA contractors to ensure all federally required documentation is obtained to support reimbursements to subrecipients. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-037 Federal Awarding Agency: USDHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Federal Award Number: 4646DRAKP00000001, 4661DRAKP00000001, 4672DRAKP00000001, 4730DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of 16 FY 24 Disaster Grants program subrecipients’ obligating award documents (OAD) found seven did not include all federally required information and one was also missing a completed assurances and agreement form. Context: Effective April 4, 2022, the unique entity identifier (UEI) replaced the Data Universal Numbering System number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. DMVA enters into awards with subrecipients using the OAD as the subgrant agreement. The subrecipient’s name and UEI are recorded on the OAD. An assurances and agreement form accompanies the OAD that includes additional federal requirements not included in the OAD. Subrecipients sign the OAD and the assurances and agreement forms certifying and agreeing to the federal requirements. According to DHSEM management, DMVA contractors assisted division staff in completing the OADs with subrecipients and provided project management for the federal disasters. Contractors were needed due to the increased workload resulting from the 2018 Cook Inlet earthquake, COVID-19 pandemic, and state declared disasters. The audit reviewed a random sample of 16 of 143 subrecipients’ OADs, including assurances and agreement forms, and found seven had the following errors: two included a subrecipient’s name that did not match the UEI number provided, of which one also included a period of performance that did not agree with the federally approved project performance period; one did not include a UEI number; one included a name and UEI number that could not be found in the federal system for award management (sam.gov) and did not have the completed assurances and agreement form; and three included a period of performance that did not agree with the federally approved project performance periods. Cause: Due to staff turnover and an increase in workload, DHSEM staff did not monitor contractors to ensure subrecipient information was accurately documented on the OAD, the assurances and agreement form was complete, and information was in sam.gov before issuing the subaward. Furthermore, DHSEM management and contractors lacked procedures to ensure all required information was obtained and documented on the OAD, including adequate DHSEM review procedures. Criteria: Title 2 CFR 200.332 requires pass-through entities ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required information at the time of the subaward. Required information includes subaward period of performance start and end dates, subrecipient UEI, and the subrecipient’s name, which must match the name associated with the subrecipient’s UEI. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Not providing accurate and complete information in the subaward documents increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DHSEM’s director should develop written procedures and adequately monitor contractors to ensure federally required information is accurately identified on the OAD and completed assurance and agreement forms are received from the subrecipient certifying agreement with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-039 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Four of 12 randomly selected FY 24 Disaster Grants SF-425 reports tested had incorrect matching amounts, one of which also had an incorrect recipient share of expenditures. Context: The SF-425 is a required quarterly federal financial form used for reporting the financial status of federal grant awards. During FY 24, 15 disasters required quarterly SF-425 reports for a total of 58 reports filed. Twelve of the 58 were selected for testing. Due to incorrect calculations, the matching amounts for four reports were understated. One report also reported incorrect recipient share of expenditures. Cause: The errors were due to insufficient procedures over the preparation and review of SF-425 reports. Criteria: Title 44 CFR 206.120(f)(2) prescribes the State shall provide financial status reports. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: The insufficient internal controls resulted in misreported financial data. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DMVA's finance officer should strengthen written procedures for the preparation and review of the SF-425 report to ensure the reports submitted to FEMA are accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-040 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4646DRAKP00000001, 4648DRAKP00000001, 4667DRAKP00000001, 4672DRAKP00000001, 4585DRAKP00000001, 4730DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in FY 24 Disaster Grants program subawards key data elements in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Additionally, the names and total compensation of each of the subrecipient’s five most highly compensated executives, if applicable, were not communicated to DMVA’s DAS staff for data entry into FSRS. Context: The FFATA was signed into law on September 26, 2006, with the intent to empower every American with the ability to hold the government accountable for each spending decision. The FFATA legislation requires information on federal awards be made available to the public via a single, searchable website, at www.usaspending.gov. The FFATA FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. To comply with FFATA requirements, DHSEM staff responsible for Disaster Grants program management obtain subawardee information from the OAD and the assurances and agreement document. The OAD is sent to DAS staff for data entry into FSRS. There were 86 Disaster Grants program subawards subject to FFATA reporting during FY 24. The audit reviewed seven randomly and two judgmentally selected subawards, totaling $6,819,071, for compliance and internal controls testing of FFATA reporting requirements. One of the seven (14 percent) subawards, totaling $1,625,735, reported an incorrect subaward project description and three (43 percent) subawards, totaling $369,218, were not reported timely. One judgmentally selected subaward, totaling $164,393, was not reported timely to FSRS, and one, totaling $4,009,660, was not reported at all. An additional 48 subawards were not reported that should have been. Reporting errors are summarized in the table below. Cause: Staff turnover and vacancies contributed to the errors and omissions. Inadequate procedures resulted in highly compensated executive salaries not being communicated to DAS staff. Since the data was entered directly into FSRS, DAS staff stated the system did not allow for review by a supervisor to ensure accuracy of the data prior to submission. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's finance officer should work with the DHSEM director to strengthen FFATA reporting procedures to ensure required reports are filed timely and key data elements comply with federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-083 Prior Year Finding: Federal Awarding Agency: National Science Foundation Impact: Significant Deficiency AL Number and Title: 47.076 RDC Federal Award Number: 1839290 Applicable Compliance Requirement: Period of Performance Condition: One of 40 sampled transactions were coded incorrectly to the wrong grant. Context: During testing of period of performance, one transaction was observed that appeared to have been liquidated beyond 120 days after the end of the period of performance. Upon further inspection, we concluded that the transaction was coded to the incorrect grant. The correct grant was still within the 120-day liquidation period after the end of the period of performance. Cause: UAF did not perform timely close out procedures on the grant which resulted in incorrectly coded expenditures to go undetected. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: One transaction was incorrectly coded to the wrong grant. Questioned Costs: None Recommendation: UAF management should adhere to their existing requirements for timely grant close out procedures. Views of Responsible Officials: Management agrees with this finding.