2024-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 242MN101S2514; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: The following exceptions were noted in the sample of 40 expenditures tested: • One claim was reported as eligible expenditures but was not eligible for federal reimbursement. • Two claims included activity that was allocated on an incorrect full-time equivalent (FTE) split. • Three timesheets tested included payroll costs that were incorrectly reported as Income Maintenance Random Moments Time Studies participants payroll expense. Some of the items noted above are included in the Child Support Services Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-004) and the Medical Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting finding (2024-005). Questioned Costs: Questioned costs identified were less than $25,000. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities and costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $827,634, consisting of 2,972 transactions. The sample of 40 transactions totaled $145,877. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the County receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly. View of Responsible Official: Acknowledge
2024-003 Procurement, Suspension, and Debarment Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 242MN101S2514; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations § 200.318(i) states that the Health and Human Services must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Additionally, the Health and Human Services must follow further federal guidance over full and open competition as provided in Title 2 U.S. Code of Federal Regulations § 200.319, and perform a cost or price analysis as provided in Title 2 U.S. Code of Federal Regulations § 200.324. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction. Condition: The following exceptions were noted in the procurements testing: • All five small purchases tested did not have documentation of price or rate quotations obtained from an adequate number of qualified sources detailing the history of procurement or documentation of full and open competition. • For the five micro-purchase procurements tested, Southwest Health and Human Services did not document how purchases are distributed among qualified suppliers, as practical. • For one of the four covered transactions tested, the verification for suspended or debarred vendors was not performed before entering into the procurement. • For the one transaction over the simplified acquisition threshold tested, no documentation was maintained detailing the history of the procurement, demonstrating full and open competition, or that a cost or price analysis was performed. Questioned Costs: None. Context: The threshold used for the procurement testing was based on the Health and Human Services’ policy for simplified acquisition threshold (over $150,000), small purchases ($3,000 to $150,000), and micro-purchases ($3,000 or less). The suspension and debarment covered transaction threshold is $25,000. The population consisted of one procurement over the simplified acquisition threshold, 37 small purchases, 38 micro-purchases, and 18 covered transactions. The sample was one over the simplified acquisition threshold, five small purchases, five micro-purchases, and four covered transactions. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing and Single Audits. Effect: It cannot be determined that the contracting process was open and fair because the Health and Human Services did not document the rationale for the contractor selection. It also cannot be determined that an entity was not suspended, debarred, or otherwise excluded from conducting business with the Health and Human Services. Cause: Southwest Health and Human Services does not have processes in place to ensure federal requirements for procurement are followed. Recommendation: We recommend the Health and Human Services maintain documentation on the history of a procurement, provide for full and open competition, and perform a cost or price analysis to support compliance with Title 2 U.S. Code of Federal Regulations §§ 200.318, 200.319, and 200.324. We further recommend the Health and Human Services maintain documentation to demonstrate that vendors were not debarred, suspended, or otherwise excluded from conducting business with the Health and Human Services; this documentation should be completed prior to entering into a covered transaction. View of Responsible Official: Concur
2024-004 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: 2023-002 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.563 Child Support Services Award Number and Year: 2301MNCEST and 2301MNCSES, 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for Child Support Services are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: Five of the 40 expenditures selected for testing were allocated on an incorrect full-time equivalent (FTE) split or there was no documentation to support the allocation used. Some of the items are included in the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-002) and the Medical Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting finding (2024-005). Questioned Costs: Questioned costs identified were less than $25,000. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $838,835, consisting of 2,339 transactions. The sample of 40 transactions totaled $148,900. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the County receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with costs allocated incorrectly. View of Responsible Official: Acknowledge
2024-004 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: 2023-002 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.563 Child Support Services Award Number and Year: 2301MNCEST and 2301MNCSES, 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for Child Support Services are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: Five of the 40 expenditures selected for testing were allocated on an incorrect full-time equivalent (FTE) split or there was no documentation to support the allocation used. Some of the items are included in the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-002) and the Medical Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting finding (2024-005). Questioned Costs: Questioned costs identified were less than $25,000. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $838,835, consisting of 2,339 transactions. The sample of 40 transactions totaled $148,900. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the County receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with costs allocated incorrectly. View of Responsible Official: Acknowledge
2024-005 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: 2023-003 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2405MN5ADM and 2405MN5MAP, 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for the Medical Assistance Program are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and Local Collaborative Time Study Cost Schedule Reports (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles: • Two claims were incorrectly allocated in the DHS-2550 and Public Health DHS-3220 reports, which resulted in expenditures reported in the incorrect categories. • One claim reported on the DHS-2550 report included expenditures ineligible for federal grant reimbursement. • Two claims and two timesheets for a Minnesota Department of Public Safety program were included in the DHS-2556 report as eligible expenditures but were not eligible for federal reimbursement. • For four timesheets tested, the payroll costs were incorrectly coded according to the Income Maintenance Random Moments Time Studies and Social Services Time Studies. Some of the items are included in the Child Support Services Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-002) and the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-004). In addition, the following exceptions were noted in the first and third quarter DHS reports tested for reporting: • The DHS-2550 and DHS-2556 reports improperly included interest on leased vehicles. • Depreciation expense was incorrectly reported on the DHS-2550 reports. • Payroll adjustments were made to the general ledger that were not reflected on the DHS-2550 and DHS-2556 reports. • Postage and fuel costs were not reported at the correct rates on the DHS-2550 and DHS-2556 reports. • The DHS-2556 reports incorrectly excluded Out of Home Placement Aid. • The DHS-2556 reports excluded IT costs that were eligible expenditures. Questioned Costs: Known questioned costs are $6,274; likely questioned costs are $51,942, for total questioned costs of $58,216. Known and likely questioned costs are calculated based on expenditures identified during testing that were included in the DHS reports and were either not eligible expenditures or were incorrectly allocated to the Medical Assistance Program. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities and costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $2,837,564, consisting of 3,561 transactions. The sample of 40 transactions total $187,658. The reporting population consisted of four quarterly DHS-2550, DHS-2556, and Public Health DHS-3220 reports; the sample was two quarterly DHS-2550, DHS-2556, and Public Health DHS-3220 reports. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the County receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reporting incorrectly. View of Responsible Official: Acknowledge
2024-006 Eligibility – MAXIS Prior Year Finding Number: 2023-004 Year of Finding Origination: 2011 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2405MN5ADM; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 42 U.S. Code of Federal Regulations §§ 435.911 and 435.945 require the state Medicaid agency to determine and verify eligibility of enrollees in Medicaid. The Minnesota Department of Human Services provides the Minnesota Health Care Programs Eligibility Policy Manual. The manual contains the Minnesota Department of Human Services eligibility policies for the Minnesota Health Care Programs, including the eligibility requirements of Medical Assistance. Specific eligibility requirements are included for participants’ citizenship verification, income limits, and asset verification. Minnesota Statutes § 256B.05 requires agencies to administer Medical Assistance. Condition: The Minnesota Department of Human Services maintains the computer system, MAXIS, which is used by the Health and Human Services to support the eligibility determination process. In the case files reviewed for eligibility, not all documentation to support participant eligibility was available, updated, or input correctly. The following exceptions were noted in the sample of 40 case files tested: • Five case files did not have verification of citizenship; and two additional case files had verification of citizenship, but MAXIS was not properly updated. • One case file did not include support for the income listed in MAXIS. • Two case files included amounts for client accounts (assets) that were not properly updated or supported for the most recent application or renewal. Questioned Costs: Not applicable. The Health and Human Services administers the program, but the State of Minnesota pays benefits to participants in this program. Context: The State of Minnesota and the Health and Human Services split the eligibility determination process. Pursuant to Minnesota statutes, the Health and Human Services performs the “intake function” needed for this program, while the State maintains the MAXIS system, which supports the eligibility determination process. Participants receive benefit payments from the State. The population consisted of 3,804 active MAXIS cases enrolled in the Medical Assistance Program in 2024; the sample size was 40 case files. The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The improper input or updating of information into MAXIS and the lack of verification or follow-up of eligibility-determining factors increase the risk that program participants will receive benefits when they are not eligible. Cause: Program personnel entering case file information into MAXIS did not ensure all required information was input or updated correctly, supported, or retained. Recommendation: We recommend Southwest Health and Human Services implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists, the program personnel properly input or update the documentation in MAXIS, and the program personnel follow up on issues in a timely manner. In addition, Southwest Health and Human Services should consider providing further training to program personnel. View of Responsible Official: Acknowledge
2024-005 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: 2023-003 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2405MN5ADM and 2405MN5MAP, 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for the Medical Assistance Program are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and Local Collaborative Time Study Cost Schedule Reports (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles: • Two claims were incorrectly allocated in the DHS-2550 and Public Health DHS-3220 reports, which resulted in expenditures reported in the incorrect categories. • One claim reported on the DHS-2550 report included expenditures ineligible for federal grant reimbursement. • Two claims and two timesheets for a Minnesota Department of Public Safety program were included in the DHS-2556 report as eligible expenditures but were not eligible for federal reimbursement. • For four timesheets tested, the payroll costs were incorrectly coded according to the Income Maintenance Random Moments Time Studies and Social Services Time Studies. Some of the items are included in the Child Support Services Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-002) and the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2024-004). In addition, the following exceptions were noted in the first and third quarter DHS reports tested for reporting: • The DHS-2550 and DHS-2556 reports improperly included interest on leased vehicles. • Depreciation expense was incorrectly reported on the DHS-2550 reports. • Payroll adjustments were made to the general ledger that were not reflected on the DHS-2550 and DHS-2556 reports. • Postage and fuel costs were not reported at the correct rates on the DHS-2550 and DHS-2556 reports. • The DHS-2556 reports incorrectly excluded Out of Home Placement Aid. • The DHS-2556 reports excluded IT costs that were eligible expenditures. Questioned Costs: Known questioned costs are $6,274; likely questioned costs are $51,942, for total questioned costs of $58,216. Known and likely questioned costs are calculated based on expenditures identified during testing that were included in the DHS reports and were either not eligible expenditures or were incorrectly allocated to the Medical Assistance Program. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities and costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $2,837,564, consisting of 3,561 transactions. The sample of 40 transactions total $187,658. The reporting population consisted of four quarterly DHS-2550, DHS-2556, and Public Health DHS-3220 reports; the sample was two quarterly DHS-2550, DHS-2556, and Public Health DHS-3220 reports. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the County receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reporting incorrectly. View of Responsible Official: Acknowledge