2024-007 Allowable Costs/Cost Principles – Cost Allocation Plan Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Programs: 93.563 Child Support Services, 93.778 Medicaid Cluster Award Number and Year: 2301MNCSES; 2024, 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 2 U.S. Code of Federal Regulations § 2 CFR 200.403(a) and § 2 CFR 200.403(g) require costs to be necessary and reasonable and be adequately documented. Condition: For two of the five departments tested, incorrect expenditure amounts were used in the cost allocation plan. In addition, for one of the five departments tested, the County did not have support for the basis of allocating the costs to benefiting departments. Questioned Costs: $2,968,953, which is calculated as $1,299,253 of department costs tested within the cost allocation plan that were derived from incorrect information and $1,669,700 in department costs without a documented basis for allocating costs. Not all questioned costs were allocated to the department reporting grant expenditures or to the grant tested as a major program. Additionally, the rate of reimbursement of allocated costs to the grant is not known to the auditor. Context: The 2024 cost allocation plan is prepared using activity and expenditures from 2022. The cost allocation plan is prepared annually by a contractor and submitted to the Minnesota Department of Human Services (DHS) for reimbursement of county-wide indirect cost reimbursement. For one department, the cost allocation plan included expenditure accounts with credit balances as debit balances and, for another department, the 2023 general ledger expenditures were used rather than 2022. Furthermore, the basis for one department was determined in direct conversation between the cost allocation plan preparer and the County, with no documented support retained. Effect: Errors in reporting expenditures and the basis of the allocations used in the cost allocation plan calculation could result in incorrect county-wide indirect cost reimbursements from DHS. Cause: The cost allocation plan preparer’s work contained errors or lacked proper support, and the County did not identify the errors or lack of support. Recommendation: We recommend the County provide accurate and supported information to the cost allocation plan preparer and appropriate staff review the cost allocation plan to ensure the data, basis, and calculation are accurate, complete, and supported. View of Responsible Official: Concur