Audit 392165

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 253NE308N1199, FFY 2025; and 253NE308N1099, FFY 2025 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2025) states, in part, the following: (a) Reporting of first-tier subawards – (1) Applicability. Unless the recipient is exempt as provided in paragraph (d) of this award term, the recipient must report each subaward that equals or exceeds $30,000 in Federal funds for a subaward to an entity or Federal agency. The recipient must also report a subaward if a modification increases the Federal funding to an amount that equals or exceeds $30,000. All reported subawards should reflect the total amount of the subaward. (2) Reporting Requirements. (i) The recipient must report each subaward described in paragraph (a)(1) of this award term to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) at http://www.fsrs.gov. (ii) For subaward information, report no later than the end of the month following the month in which the subaward was issued. . . . Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020 as of January 14, 2026. A similar finding was noted in the prior audit. Repeat Finding: 2024-031 Questioned Costs: None Statistical Sample: No Context: We met with the Agency to verify that the reporting had been completed. However, during our discussions, it was noted that the Agency was still unable to upload the required reports because it was using the wrong Federal Award Identification Numbers (FAINs). As of January 14, 2026, the reporting still had not been completed. For the fiscal year ended June 30, 2025, the Agency paid subrecipients $134,745,728 from the Child Nutrition programs. Cause: The Agency had not developed adequate procedures to complete the reporting requirements and was using the wrong information for the FAINs, causing the data-upload file to be rejected. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not complying with Federal regulations. Recommendation: We recommend the Agency update its procedures and complete the FFATA reporting as soon as possible. Management Response: The FAINs used for FFATA reporting did not match the coding utilized in the E1 payment system the NDE uses. Therefore, the report of recipient payments was not generating data that the sam.gov reporting system recognized and would accept.

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-23-2-1001, FFY 2023; W91243-24-2-1001, FFY 2024; W91243-25-2-1024, FFY 2025; W91243-25-2-1001, FFY 2025; W91243-25-2-1021, FFY 2025 Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2024, and January 1, 2025), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2024, and January 1, 2025), a non-Federal entity must establish and maintain effective internal control over the Federal award to provide reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) requires financial management systems of the State be sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Per Title 2 CFR § 200.305(a) (January 1, 2024, and January 1, 2025), payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205. National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” GCAPL 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. The instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a: Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients. A good internal control plan would include procedures to ensure the time between the drawdown of Federal funds and disbursements is minimized and in compliance with National Guard Regulations. Condition: The Agency was noncompliant with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2024-066 Questioned Costs: None Statistical Sample: No Context: We tested five drawdowns of Federal funds to support the Agency’s operations. We tested to determine whether the Agency had expended the cumulative amounts drawn down for the awards tested within the required timeframe and noted the following: • Three drawdowns were noncompliant with NG Policy 5-1. Cumulative drawdowns for one of the draws were expended 63 days after the drawdown of the Federal funds. Cumulative draws for the other draws had yet to be fully expended as of January 8, 2026. The table below provides a summary of the three draws: See Schedule of Findings and Questioned Costs for chart/table. • For 5 of 5 SF-270’s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an overreporting of $2,764 to an overreporting of $3,530,797, with a net total overreporting of expenditures by $4,074,284 for the five reports tested. Cause: Inadequate procedures for estimating fund needs for the upcoming month. Regarding SF-270 reporting, the Agency has stated it agrees with the finding; however, it has yet to implement corrective action. Effect: The Agency is noncompliant with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and the advance state requirement function. Program obligations and liquidations are reconciled and reported on at least a quarterly basis with federal constituents.

Program: AL 84.010 – Title I Grants to Local Educational Agencies – Subrecipient Monitoring Grant Number & Year: All open, including S010A230027, FFY 2024; S010A240027, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 200.332 (January 1, 2024, and January 1, 2025) requires a pass-through entity to monitor the activities of subrecipients as necessary to ensure that subaward funds are used for authorized purposes in compliance with Federal regulations, track Single audit requirements and verify that a Single audit was obtained if required, review financial and performance reports of the subrecipient, and follow-up and resolve all audit finding pertaining to the Federal award. 2 CFR § 200.501 (January 1, 2024), as it applies to audit requirements of entities for fiscal years ended prior to October 1, 2025, states the following: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514[.] Good internal control requires policies and procedures to ensure that subrecipient monitoring is sufficiently designed and performed regularly to provide assurance that grant funds are used in accordance with Federal requirements. This includes maintaining adequate documentation to support fiscal monitoring performed for Federal programs and documentation of follow-up procedures performed when subrecipients are expected to have Federal expenditures exceeding Federal audit requirement thresholds but do not receive a Federal Single audit. Condition: The Agency’s procedures can be improved to ensure that: • Subrecipients’ uses of funds were monitored to ensure compliance with all Federal and grant requirements. • Subrecipients obtain Single audits mandated by Federal requirements. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency disbursed $106,911,261 of Title I Federal funds to 242 different subrecipients during the fiscal year ended June 30, 2025. We noted the following during our subrecipient monitoring testing. Insufficient Subrecipient Fiscal Monitoring Procedures Per its fiscal monitoring procedures and schedule, the Agency is to perform fiscal monitoring of the various subrecipients on a three-year rotational cycle. These procedures include reviewing subrecipient expenditures claimed for subgrant awards applicable for the period the Agency is monitoring. We randomly selected 25 subrecipients to review the fiscal monitoring documentation provided by the Agency. We noted the following for two subrecipients: • For one subrecipient tested, the fiscal monitoring was last completed in August 2021 for the 2019–2020 program year, during which no compliance errors were noted. Per the Agency, fiscal monitoring was scheduled to be performed again in calendar year 2023 for the 2022–2023 program year; however, this monitoring was never performed. As of June 30, 2025, no fiscal monitoring review had been initiated. Additionally, during a review of reimbursement requests submitted during the fiscal year, we noted some questionable expenditures, including $3,027 spent on hotels at Disney’s Animal Kingdom in Florida, which were reportedly in association with a teaching conference held eight miles away at the Orlando World Center Marriott. The daily rate charged by the hotel was $299 per night; the Government Services Administration’s rate for lodging in Orlando for June 2024 was $140 per night. We also noted that a possible travel expenditure of $955 was paid to Holiday Express for which no support was obtained. These types of higher-risk expenditures further highlight the need for subrecipient monitoring to be performed regularly. • For another subrecipient, the Agency last completed its fiscal monitoring in August 2025 for the 2023–2024 program year. However, monitoring documentation was not sufficient to determine what monitoring procedures were completed or whether that monitoring was adequate. While we did observe various records on file, including employee time and effort logs and invoices supporting supplies and service costs, the audit worksheet that the Agency is supposed to complete for all fiscal monitoring performed did not indicate what items were reviewed or the conclusion regarding those items. We did observe an exit letter issued by the Agency in August 2025, which indicated that no issues were found. Single Audit Tracking Procedures During our review of subrecipient audits and Single audit tracking procedures implemented by the Agency, we noted that, for one subrecipient tested, the Agency had identified the subrecipient as having more than $750,000 in Federal expenditures for the subrecipient’s fiscal year ended August 31, 2024, but noted that no Single audit was required. After we inquired with the Agency, no documentation could be provided to support that the Agency performed any follow-up procedures to verify that a Single audit was not required. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements or to ensure that subrecipients obtained Single audits when required. Effect: Without adequate monitoring and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency strengthen procedures to ensure that subrecipient monitoring is properly designed to ensure compliance with all Federal and grant requirements and that documentation is maintained to support procedures performed. We also recommend the Agency strengthen procedures to ensure that subrecipient Single audit requirements are properly tracked, and all Single audits are reviewed in a timely manner. Management Response: NDE agrees with this finding.

Program: AL 84.126 – Rehabilitation Services Vocational Rehabilitation Grants to States – Reporting Grant Number & Year: H126A240039, FFY 2024; H126A250039, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) requires financial management systems of the State to be sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 34 CFR § 76.707 (July 1, 2024), personal services performed by an employee of the State are obligated when the services are performed. Good internal control and sound accounting practices require adequate policies and procedures to ensure that information included in Federal reports is correct and accurate. Condition: The Agency lacked procedures to ensure that the unliquidated obligations and administrative costs were reported accurately on the RSA-17 reports. Repeat Finding: 2024-033 Questioned Costs: None Statistical Sample: No Context: We tested two RSA-17 reports submitted by the Agency. We noted the following: Grant H126A240039, Quarter Ended March 31, 2025 • The Federal Share of Unliquidated Obligations reported on line 18 was $3,760,436. The amounts reported were not correct due to the following: o The Agency did not report $190,628 of payroll costs charged to the grant on April 2, 2025, which was associated with work performed during the period March 10, 2025, through March 23, 2025. o The Agency reported $626,761 of unliquidated payroll obligations for payroll costs charged to the grant on April 16, 2025, which was associated with work performed during the period March 24, 2025, through April 6, 2025. Work performed during the period April 1, 2025, through April 6, 2025, would not constitute an obligation as of March 31, 2025. Grant H126A250039, Quarter Ended March 31, 2025 • The Non-Federal Share of Unliquidated Obligations reported on line 29 was $110,371. The amount reported was incorrect, as it excluded $441,446 in payroll costs for vocational rehabilitation services performed from March 10, 2025, through March 23, 2025, which were coded to non-Federal funds on April 2, 2025. • The Administrative Expenditures reported on line 37 was $1,533,909. The amount reported was incorrect because it counted indirect costs twice, resulting in an overstatement of $244,108. Cause: Inadequate review and documentation of amounts reported. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency update its procedures to ensure that obligations and expenditures are being properly reported in accordance with reporting requirements. Management Response: H126A2400390 - Federal Share of Unliquidated Obligations: Agency error in noting that 3/23/25 payroll had not posted by 3/31/25, and inclusion of partial payroll (4/1-4/6) in unliquidated obligations. H126A2500390 - Non-federal Share of Unliquidated Obligations: While these payroll costs were obligated to H126A2500390 on the 4/2/2025 payroll, Nebraska VR anticipated a JE from H126A2500390 to H126A2400390 would be completed because the match requirement for H126A2500390 had been met, and an overmatch of general funds would have resulted in an MOE penalty. Based on the information at that time and the assumption the costs would be paid from H126A2400390, they were included as an unliquidated obligation on the H126A2400390 RSA17. Due to an opportunity to capture additional federal dollars via the re-allotment process, it was later determined to leave the payroll costs coded to H126A2500390 and draw down additional federal funds. For future reports, unliquidated obligations will be reported as is. Administrative Expenditures: When providing documentation for the audit, Nebraska VR discovered this error and reported it to the auditor. The federal report has been re-opened and the error corrected.

Program: AL 84.365 – English Language Acquisition State Grants – Subrecipient Monitoring Grant Number & Year: All open, including S365A230027, FFY 2024; T365A240027, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 200.332 (January 1, 2024, and January 1, 2025) requires a pass-through entity to monitor the activities of subrecipients as necessary to ensure that subaward funds are used for authorized purposes in compliance with Federal regulations, track Single audit requirements and verify that a Single audit was obtained, if required, review financial and performance reports of the subrecipient, and follow up and resolve all audit finding pertaining to the Federal award. Good internal control requires policies and procedures to ensure that subrecipient monitoring is sufficiently designed and performed regularly to provide assurance that grant funds are used in accordance with Federal requirements. This includes maintaining adequate documentation to support fiscal monitoring performed for Federal programs, such as documenting the populations of transactions that agree or reconcile to reimbursement requests, identifying the specific transactions that are being reviewed, and maintaining supporting documentation for those specific items reviewed. Condition: The Agency lacked adequate procedures for monitoring subrecipient use of funds to ensure compliance with all Federal and grant requirements. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency disbursed $6,255,240 of Federal funds to 26 different subrecipients during the fiscal year ended June 30, 2025. We randomly selected 10 subrecipients to ensure that subrecipient monitoring was adequate to ensure that funds were used in accordance with Federal requirements. We noted issues with monitoring procedures for eight subrecipients tested. The following table identifies the eight subrecipients, the total amount of aid paid during the fiscal year ended June 30, 2025, the last school year reviewed, and the funds subject to monitoring for those years. See Schedule of Findings and Questioned Costs for chart/table. Insufficient Subrecipient Fiscal Monitoring Procedures Per the Agency’s fiscal monitoring procedures and monitoring schedule, the Agency is to perform fiscal monitoring of the various subrecipients on a three-year rotational cycle. These procedures include reviewing subrecipient expenditures claimed for subgrant awards applicable for the period the Agency is monitoring. There are two subprograms that subrecipients may be awarded Federal funds by the Agency, Immigrant Education (IE) for schools that have experienced a significant increase in number of immigrant children and youth in their schools, and English Learners (EL) for schools to use to help identified students attain English proficiency and meet challenging State academic standards. During review of fiscal monitoring documentation provided by the Agency, we noted the following: • For one subrecipient tested, the Agency could not provide documentation to support the Agency’s last completed review. The Agency did provide an engagement letter, dated November 18, 2025, indicating that it had started a new monitoring review of the subrecipient for the 2023-2024 school year; however, this was after our audit period and was not yet completed. • For seven subrecipients tested, we were unable to determine how the Agency had sampled transactions for the subrecipients’ accounting records, such as a general ledger report of transactions, supporting the expenditures for the periods being reviewed. In one instance, no such records were provided in the review documentation. In another instance, the accounting records did not agree to the period being reviewed, and there was no documentation of a reconciliation by the Agency. For the remaining five, there were appropriate accounting reports; however, there was not adequate documentation of items selected for review. Additionally, when considering the specific IE and EL subprograms for which subrecipients are awarded funds, we noted the following: o For two subrecipients, there was no documentation that amounts awarded under the IE or EL subprogram were reviewed. For one of the subrecipients, documentation was provided, but it was not clear if it was actually reviewed by the Agency. o For four subrecipients, transactions were identified as being reviewed for the IE subprogram; however, there was no supporting documentation on file that could be provided to us for verification. o For four subrecipients that received EL subprogram funds, documentation was not adequate to support amounts reviewed. For one, there was no indication of amounts reviewed. Amounts were identified for the other three, but the Agency did not have any supporting documentation for the amounts identified, or it was not clear that supporting documentation was actually reviewed. We also noted that, for one subrecipient tested, the most recent fiscal monitoring review was completed in calendar year 2021, which was over three years prior. As the Agency’s procedures indicate every subrecipient should be subject to fiscal monitoring at least once every three years, we consider this review to be untimely. Other Issues Noted During our review of one subrecipient aid payment tested, we noted that the Agency’s reimbursement request review did not obtain documentation for credit card transactions, totaling $7,118, as required by the Agency’s grant management procedures. The Agency personnel that reviewed the request had indicated they reviewed the credit card transactions; however, no documentation was obtained and on file to support the transactions in accordance with the Agency’s grant management procedures. Additionally, we noted one instance of the Agency not having documentation on file to demonstrate that it followed up on corrective actions being taken by a subrecipient for issues the Agency identified during its subrecipient monitoring. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements. Effect: Without adequate monitoring and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency strengthen procedures to ensure that subrecipient monitoring is properly designed to ensure compliance with all Federal and grant requirements, and documentation is maintained to support procedures performed, including maintaining documentation of follow-up performed when corrective action plans are required for problems identified during the monitoring. Management Response: NDE agrees with this finding.

Program: AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Reporting Grant Number & Year: S425U210048, grant period ending 9/30/2024 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. . . . 2 CFR § 200.511 (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same regulation states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of five subawards/amendments tested. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-035 Questioned Costs: None Statistical Sample: No Context: Per the usaspending.gov website, the Agency had reported 20 subawards/amendments obligated during the fiscal year ended June 30, 2025, totaling $1,378,197. We tested five subawards/amendments. One subaward was not reported in the FFATA Subaward Reporting Systems (FSRS) as of February 18, 2026. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal Requirements. Management Response: NDE agrees with this finding.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Subrecipient Monitoring Grant Number & Year: 2201NETANF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352 (October 1, 2024) requires a pass-through entity to do the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward . . . * * * * (f) Verify that every subrecipient is audited as required by subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 75.501. Per 45 CFR § 75.431(c) (October 1, 2024): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Good internal control requires procedures to ensure Federal requirements are met. Condition: The Agency’s subrecipient monitoring procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2024-041 Questioned Costs: None Statistical Sample: No Context: The Agency paid $30,643,635 to 31 TANF subrecipients during the fiscal year. We tested the desk review the Agency completed during the fiscal year for one subrecipient and noted the following: • The subrecipient tested is a child advocacy center (CAC). The Agency stated it allows CACs to charge expenses to TANF up to the percentage of TANF-eligible clients the CACs serve in a month. The subrecipient tested reported that 90.38% of the clients it served for the month tested were TANF eligible. However, during its desk review, the Agency did not view support for this percentage to ensure it was proper and adequately supported. • The Agency did not require the subrecipient to charge benefits to TANF consistently. The subrecipient charged 80% of the salaries and wages for four employees to TANF and 63% of the salaries and wages of the other two employees to TANF. The subrecipient charged FICA and retirement benefit costs to TANF individually by employee based on these percentages. Thus, the subrecipient charged 80% of these costs to TANF for four employees and 63% of these costs to TANF for two employees. However, the subrecipient charged 80% of its insurance (health, dental, and vision) benefit expenses for all employees to TANF. This included the two employees whose wages and other benefits were charged to TANF at 63%. We also selected two subrecipients for testing that would have required a Single audit based on the amount of TANF funds received from the Agency during the subrecipients’ previous fiscal years. One of the subrecipients received $1,871,251 in TANF funds during the subrecipient’s fiscal year 2024. The subrecipient should have submitted a Single audit for fiscal year 2024 by March 31, 2025. However, it had not submitted the report at the time of fieldwork on December 12, 2025, and the Agency had not followed up with the subrecipient. Cause: Inadequate review procedures. Effect: Noncompliance with Federal regulations and an increased risk for fraud or errors to occur. Recommendation: We recommend the Agency strengthen its subrecipient monitoring procedures to ensure compliance with Federal regulations. We further recommend the Agency strengthen procedures to ensure subrecipient audits are obtained and reviewed timely. Management Response: The Agency partially agrees. The Agency disagrees with the second bullet point. We agree that the subrecipient is not charging benefits to TANF consistently. However, they are charging less than they potentially could. As long as the provider is not over charging the grant, we do not see any need to force the provider to charge more. APA Response: Fringe benefits should be charged to Federal awards consistent with how salaries and wages are charged to the Federal program per 45 CFR § 75.431(c). Had the subrecipient tested charged insurance benefits expenses consistent with how the salaries and benefits were charged to the program, it would have charged less – not more – to the program.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Eligibility Grant Number & Year: 2401NERCMA, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 400.2 (October 1, 2024) defines “refugee medical assistance” (RMA) as “(a) Medical assistance provided under section 412(e) of the Act to refugees who are ineligible for the Medicaid program . . . .” Per the U.S. Department of Health and Human Services’ Office of Refugee Resettlement (ORR) guidance, published in the Federal Register on March 28, 2022, at 87 FR 17312: In accordance with ORR regulations, the Director of ORR is announcing the expansion of the Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) eligibility period from 8 months to 12 months of assistance for participants whose date of eligibility for ORR benefits is on or after October 1, 2021. Title 470 NAC 2-002 states, in part, the following: Eligibility begins with the date of arrival in the United States, if the refugee meets all eligibility requirements. For asylees, victims of severe forms of trafficking, and Cuban and Haitian Parolees eligibility begins with the date of granted status. The time limit is applied to each refugee separately, not to the unit as a whole. If the refugee applies after the date of arrival in the United States, they may receive assistance for the remaining months of their eligibility period. Good internal control requires procedures to ensure eligibility is correctly determined, and benefits end when the period of eligibility expires. Condition: For 5 of 35 Refugee Resettlement Program (RRP) assistance payments tested, the payments were noncompliant with Federal and State regulations. A similar finding was noted in the prior audit. Repeat Finding: 2024-042 Questioned Costs: $3,663 known Statistical Sample: No Context: The RRP helps refugees and other eligible newcomers achieve economic self-sufficiency, well-being, and successful integration in the United States. The RRP provides both aid payments directly to individuals who are deemed eligible for cash assistance (RCA) and medical assistance (RMA) through the managed care program. We randomly tested 35 aid payments: 20 to individuals who received RCA payments and 15 for RMA payments. We noted the following: • Three of 15 RMA recipients tested appeared to have been eligible for Medicaid; however, their monthly capitation payments were paid by RRP. As a result, we question costs of $2,198. • Two recipients tested received RMA benefits after their 12-month eligibility period had ended, resulting in additional questioned costs of $1,465. We did note during testing that the Agency had identified some of the capitation payments were incorrectly charged to RRP; however, the Agency had not corrected these payments at the time of fieldwork. RMA aid expenditures for the fiscal year totaled $1,123,609. The Federal RMA sample tested was $3,663, and Federal payment errors noted for the random sample tested were $732. The dollar error rate for the sample was 19.98% ($732/$3,663), which estimates the potential dollars at risk for fiscal year 2025 to be $224,497 (dollar error rate multiplied by the population). In addition to the $732 Federal questioned costs noted in the sample items tested, we noted $2,931 of Federal questioned costs on other RMA payments on behalf of these recipients. Cause: The Agency incorrectly enrolled refugees under the RMA program, when the refugees were eligible for Medicaid and incorrectly set the eligibility end dates within its case management system. Effect: Increased risk of loss or misuse of funds. Recommendation: We recommend the Agency strengthen procedures to ensure RMA recipients are eligible, and benefits are discontinued when the period of eligibility expires. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Subrecipient Monitoring Grant Number & Year: Various, including 2401NERSSS, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2024) requires a pass-through entity to “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2024) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.405(a) (October 1, 2024) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. * * * * (x)(3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 45 CFR § 75.431(c) (October 1, 2024) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker’s compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. A good internal control plan requires procedures to ensure subrecipient expenditures are properly documented in accordance with Federal regulations, and payments apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2024-043 Questioned Costs: Unknown Statistical Sample: No Context: The Agency paid 13 subrecipients a total of $5,316,302 during the fiscal year ended June 30, 2025, for the program. Subrecipient reimbursement requests were submitted quarterly with a summarized invoice of costs incurred and the general ledger. The Agency reviewed the quarterly invoices and general ledger to ensure submitted expenditures were consistent with the approved budget. In addition, the Agency performed quarterly desk audits where it selected lines of expenses to obtain the underlying support from the subrecipient. Depending on the timing and the time period reviewed, the Agency’s procedures required it to select 10% or 40% of expenditures for the quarterly desk audit. We randomly selected three subrecipients for testing and requested documentation of the desk audits performed by the Agency for the three subrecipients. We noted the following: • Subrecipient One: The Agency completed a desk audit for the quarter ended March 31, 2025. The expenses for the quarter totaled $176,958, and the Agency selected 81.6% of the expenditures for review, which is more than what the Agency’s policies required. We noted that the Agency obtained timesheets for all employees to support the allocation percentage; however, the Agency did not obtain other records, such as pay stubs, to support that the correct percentage of wages was charged to the grant for the employees tested. The Agency also reviewed two fringe benefits expenses, totaling $17,928, but it does not appear the Agency received documentation to determine that the amounts charged were correct. • Subrecipient Two: The Agency completed a desk audit for the quarter ended March 31, 2025. The expenses for the quarter totaled $70,779. The Agency selected just over 40% of the expenses to test. We noted that, for five employees the Agency selected, the timesheets provided did not specify the cost objectives the employee worked. One of these employees had his wages split 50% between the Refugee grant and another Federal award, but there was no documentation to support this was the correct allocation. Additionally, the Agency reviewed the fringe benefits charged to the grant; however, no documentation was obtained to ensure the amount of fringe benefits charged was correct. The Agency identified noncompliance for inadequate timesheets, but there was nothing documented on how the Agency followed up to resolve the noncompliance. • Subrecipient Three: The Agency completed a desk audit for the quarter ended March 31, 2025. The expenses for the quarter totaled $87,047. The Agency selected over 40% of the expenses to test; however, the Agency did not review fringe benefits, which were for 21% of the expenses. We also noted that, for nine hourly employees, no timesheets were provided to support the number of hours worked. The Agency had identified the lack of timesheets as noncompliance, but it was unclear how the Agency followed up on this noncompliance. Cause: There appears to be adequate written procedures; however, documentation of how the Agency completed its reviews and follow-up of noncompliance was inadequate. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Subrecipient monitoring procedures could be improved by documenting what steps were taken when noncompliance issues were noted and how they were resolved. Procedures could also be improved by obtaining all needed source documentation to support payroll and benefit charges. This may include timesheets, paystubs, payroll registers, benefit documentation, and other financial records. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Reporting Grant Number & Year: 2401NERSSS, FFY 2024; 2501NERSSS, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 2 CFR § 170, Appendix A 1. (January 1, 2024) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency. . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. . . . Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same section states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of eight subawards tested. An additional four subawards were not submitted timely, and one of those subawards noted an incorrect date. A similar finding was noted in the prior audit. Repeat Finding: 2024-044 Questioned Costs: None Statistical Sample: No Context: According to the Agency’s Subaward tracking spreadsheet, there were 14 subawards/amendments obligated during the fiscal year ended June 30, 2025. We tested eight of those subawards obligated to three subrecipients. One of those subawards was not reported as of February 4, 2026. The subaward should have been reported by May 31, 2025. Additionally, four subawards were not submitted timely. Two subawards were 25 days late, and the other two were 156 days late. One subaward amendment submitted 25 days late incorrectly reported that the subaward amendment was signed on July 21, 2024, but the subaward amendment was signed on April 28, 2025. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate controls, there is an increased risk that subawards will not be reported timely and correctly. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported as required. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance – Reporting Grant Number & Year: Various, including 2401NELIEA, FFY24, and 2501NELIEA, FFY25 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 96.30(a) (October 1, 2024) states, in relevant part, the following: Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. Good internal control requires procedures to ensure that all Federal reports contain complete and accurate information. Condition: The State lacked procedures to ensure that Federally required reports contained complete and accurate information. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: During our testing of Federally required annual and quarterly LIHEAP reports submitted for the fiscal year ended June 30, 2025, we noted the following: Annual Carryover Report On the annual carryover report, the State is required to report the amount of LIHEAP funds unobligated at the end of year one of the grant. Based on the amount of unobligated funds, the State then reports the amount of funds allowable for carryover into year two and the amount of unobligated funds that are to be returned to the Federal government. During our review of the September 30, 2024, carryover report submitted for grant 2401NELIEA, we observed the following variances between the amount reported and underlying accounting records. See Schedule of Findings and Questioned Costs for chart/table. The variance above was due to the Agency incorrectly assessing the effects of correcting journal entries made after September 30, 2024. In determining the amount of unobligated funds, the Agency used the projected amount of the correcting journal entries rather than the actual amount of the journal entries that were made. Annual Performance Data Report Following the end of each Federal fiscal year, the State is to report the estimated uses of LIHEAP funds and the average household benefit by type of LIHEAP assistance provided. We observed numerous errors in the annual performance data report submitted for Federal fiscal year 2024, as summarized in the tables below. The inaccurate reporting was the result of the Agency inaccurately compiling the data used to determine the amount of unobligated funds and inconsistently reporting administrative and planning costs. Further, due to the method used to estimate uses of LIHEAP funds, the errors in the unobligated, administrative, and planning costs were pulled through to the other report fields, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we noted that the average household benefits reported by the Agency did not agree to the underlying documentation on file. The reported amounts agreed to neither the amount calculated by the Agency, which failed to update the reported amounts properly, nor the amount we calculated due to the errors noted above. See Schedule of Findings and Questioned Costs for chart/table. Lastly, we noted that the Agency reported an average heating assistance benefit of $514/household using infrastructure act funds. However, the Agency could not provide documentation to support how this amount was calculated. The Agency subsequently informed us that the funds were used for supplemental payments, which were set at $143/household, resulting in an overstatement of $371/household. Quarterly Performance Reports All LIHEAP recipients are required to submit quarterly performance data, including the number of households assisted during the quarter, cumulative obligations, and program implementation detail. We tested the reports submitted for the quarters ended September 30, 2024, and June 30, 2025. During testing of these two quarterly reports, we noted the following: Number of Households Assisted & Cumulative Obligations During our review, we noted variances in the amounts reported for the number of assisted households and cumulative obligations, as detailed in the table below. See Schedule of Findings and Questioned Costs for chart/table. For both reports, we noted the following errors when the Agency compiled the household data: 1) improperly reporting applicant-only households as assisted households; 2) errors in the reporting logic of the Agency’s LIHEAP system; 3) households being counted multiple times; and 4) households being reported in the wrong quarter. Additionally, we noted that the amount of obligations reported was inconsistent with the carryover report submitted for September 30, 2024, and was overstated when compared to the amount of unobligated funds reported on the carryover report. Program Implementation and Support Information On the report submitted for the quarter ended September 30, 2024, the Agency reported that the State had increased the number of unduplicated households served by over 3,951 households. The Agency could not provide support for how this amount was determined and reported to us that the number of households served had actually decreased during the year. Cause: 1) Inadequate review of grant activity to ensure the obligations were determined properly; 2) logic errors in system reports; and 3) inadequate procedures to ensure data was not duplicated for reporting purposes. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency review its procedures, making necessary updates to ensure that obligations and household assistance data is reported in accordance with reporting requirements. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance – Reporting Grant Number & Year: 2401NELIEA, FFY24, 2501NELIEA, FFY25 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted both timely and accurately. Condition: FFATA reporting was not submitted timely for four of four subawards/amendments tested, and the amount of the subaward/amendment reported was inaccurate for two of four subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 16 subawards obligated during the fiscal year ended June 30, 2025. We tested four of those subawards. Two of the subawards had incorrect subaward amounts reported, and four of the subawards were not submitted timely, ranging from 55 to 196 days late. Additionally, we noted that the reported action date for two of the four subawards tested was inaccurate. In one instance, the action date was reported as June 7, 2024; however, the subaward was issued on July 11, 2024. In the other instance, the action date was reported as January 13, 2025; however, the subaward was not issued until February 20, 2025. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that subawards are reported timely and accurately. Effect: Increased risk of noncompliance with Federal requirements. Recommendation: We recommend the Agency update its procedures to ensure that subawards are reported timely and accurately. Management Response: The Agency agrees.

Program: AL 93.569 – Community Services Block Grant – Subrecipient Monitoring Grant Number & Year: Various, including 2501NECOSR, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2024) requires a pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. 45 CFR § 75.430(i)(1) (October 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Per 45 CFR § 75.431(c) (October 1, 2024): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Good internal control requires procedures to ensure that Federal requirements are met. Condition: The Agency’s subrecipient monitoring procedures for reviewing expenditure reports can be improved upon. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency required Community Services Block Grant (CSBG) subrecipients to submit monthly and quarterly expenditure reports. The Agency reimbursed the subrecipients monthly after reviewing and approving the monthly expenditure reports. The Agency did not require the subrecipients to provide detailed supporting documentation for expenses claimed on the monthly expenditure reports. However, the Agency did require the subrecipients to submit line-item detail of all expenses reflected on the quarterly expenditure reports. From the line-item detail provided, the Agency selected expenses to review and requested the subrecipients to provide detailed supporting documentation for these expenses. We reviewed two quarterly expenditure report reviews the Agency completed, each for a different subrecipient, during the fiscal year. We noted the following: • The Agency selected one employee’s salaries and wages to test for each subrecipient. The Agency did not obtain adequate supporting documentation for salaries and wages that both subrecipients charged to the program. o For the first subrecipient, the employee tested was paid $3,947 in salaries and wages for work during the quarter, and the subrecipient charged this entire amount to the CSBG program. However, per the employee’s timesheet, the employee’s time was coded to a non-CSBG program. The subrecipient recorded a journal entry to move the employee’s wages to the CSBG program. The Agency did not follow up with the subrecipient for an explanation for why the wages were transferred. o The second subrecipient charged $2,974 in salaries and wages to the CSBG program for the employee tested. While the Agency obtained timesheets and paystubs for support, the amount charged did not agree directly to the support, and the Agency could not explain how the amount charged was determined from the support. • For the first subrecipient, the personnel expenses claimed included $25,159 in other benefits (over 23% of the subrecipient’s expenses for the quarter), which included accrued leave and “other fringe benefits.” The Agency obtained detail from the subrecipient’s accounting system to support this amount but did not review detailed support (such as paystubs or leave records) for this amount to verify the subrecipient properly charged the benefits to CSBG in accordance with benefits received. • For both subrecipients, the Agency did not document how it determined the non-personnel expenditures were charged to the CSBG program in accordance with benefits received. Following APA inquiry, the Agency provided explanations for how it determined some (but not all) of the expenses were proper. • For the first subrecipient, the Agency did not obtain adequate underlying supporting documentation for two expenses, totaling $230. The Agency obtained internal records from the subrecipient but did not obtain vendor invoices. Cause: Inadequate review procedures. Effect: Noncompliance with Federal regulations and an increased risk for the occurrence of fraud or errors. Recommendation: We recommend the Agency strengthen its subrecipient monitoring procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.575 – Child Care and Development Block Grant – Allowable Costs/Cost Principles Grant Number & Year: 2301NECCDD; FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 45 CFR § 75.303 (October 1, 2024) states, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: One of 25 operating expenditures tested was not properly charged to the Federal grant. Repeat Finding: No Questioned Costs: $1,358 known Statistical Sample: No Context: We randomly selected 25 operating expenditures paid with Federal funds. One of the expenditures tested was charged to the incorrect program. That $1,358 expenditure was for computer equipment and was charged to the Child Care and Development Block Grant (Child Care). However, the employees who benefited from the computer equipment worked in the Developmental Disabilities Division. Therefore, the Child Care block grant was incorrectly charged. The total Federal sample tested for Child Care was $11,351, and total Federal operating expenditures for Child Care during the fiscal year totaled $2,597,660. Based on the sample tested, the dollar error rate for the sample was 11.96% ($1,358/$11,351), which estimates the potential dollars at risk for fiscal year 2025 to be $310,680 (dollar error rate multiplied by the population). Cause: Employee error. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency agrees with the finding.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Period of Performance Grant Number & Year: 2101NECDC6, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.60(d) (October 1, 2024): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. Per the Federal Notice of Award for 2101NECDC6, “ARP CCDF Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024.” A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the American Rescue Plan Act (ARPA) grant after the period of performance. A similar finding was noted in the prior audit. Repeat Finding: 2024-047 Questioned Costs: $2,829,758 known Statistical Sample: No Context: ARPA Child Care and Development Fund (CCDF) Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024. Expenditures for the ARPA grant included two journal entries for claims originally paid with State funds from April 2024 through June 15, 2024. The claims were for the service period January 2024 through May 2024, which is after the obligation period. There was no obligation to pay these claims as of September 30, 2023, as services had not been provided. See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency had verbal discussions with the Federal grantor and believed, based on those discussions, that the expenditures were allowable. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: The Agency disagrees. Federal Partners approved this process in writing, which was provided to the APA. These costs are allowable and in the federally allowed period for these grants. APA Response: To support its position, the Agency relies upon a cursory email response from its Federal Partners. That generic, one-sentence message lacked the detail necessary to address our finding. Additionally, an almost identical finding in the prior year’s audit required a management decision by the cognizant Federal agency per Title 2 CFR § 200.521(a); however, we have yet to receive it.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability Grant Number & Year: 2101NECDC6, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67 (October 1, 2024) states, in part, the following: (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. * * * * (c) Fiscal control and accounting procedures shall be sufficient to permit: * * * * (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. The Frequently Asked Questions (FAQs) for the Restoration and Enhancement Program (https://dhhs.ne.gov/Documents/NE_DHHS_CCDF_REP%20FAQ%20_Revised_5.1.2024.pdf) includes, in part, the following: The goal of the Restoration and Enhancement Program (REP) is to improve facilities, invest in new equipment, and enhance the quality of child care homes and centers throughout the state of Nebraska. * * * * III. 6. All Restoration and Enhancement Program funds must be spent on or before November 30, 2024. Requests for extensions will be reviewed case by case. * * * * IV. 1. Programs may only need to repay any funds that are not spent on or before November 30, 2024, if the program has not remained open and caring for children for 12 months after the award date, or if the grant funds were spent on items not allowed. Repayment may be required if the applicant provides inaccurate or false information or there are other applicable instances of non-compliance. * * * * IV. 2. Ten percent (10%) of programs who receive Restoration and Enhancement Program grant funds may be audited to ensure the proper use of grant funds and continued program eligibility. All grant recipients are required to keep receipts of the items purchased for 5 (five) years for potential auditing purposes. Repayment may be required if the applicant cannot provide receipts. Good internal control requires procedures to ensure that State and Federal requirements are met. Good internal control also requires procedures to ensure amounts awarded are adequately supported. Condition: The Agency did not have adequate procedures to ensure grants to child care providers were spent properly and complied with State and Federal requirements. Repeat Finding: No Questioned Costs: $388,654 known Statistical Sample: No Context: Section 2201 of the American Rescue Plan Act (ARPA) of 2021 provided states supplemental discretionary Federal funding to help more families afford child care and to improve the quality of child care for all children. The Restoration and Enhancement Program (REP) utilized this funding to assist licensed child care providers to improve facilities, invest in new equipment, and enhance the quality of child care homes and centers. Funding could be used for minor remodeling and for upgrading child care programs to meet state and local health and safety requirements and also to improve the quality of care to meet accreditation or other quality enhancement programs such as Step up to Quality. During fiscal year 2025, a total of $4,493,424 in grants was paid to 94 eligible child care providers. Providers had until November 30, 2024, to spend the funds. We tested 10 grant payments to child care providers, totaling $688,254. We requested the application, award notification, and supporting documentation for expenditures, including proof of payment such as a cancelled check, bank statement, or credit card receipts. The Agency did not require the child care programs to submit documentation for their purchases, so the Agency had to request the supporting documentation for the expenditures from the child care providers we selected for testing. Six of the 10 grant payments tested did not provide adequate supporting documentation. We noted the following issues: • One child care center was awarded $152,128. The center submitted receipts, totaling $51,451, for allowable expenses. The center provided $131,809 in receipts that did not appear allowable, which included the following: $82,874 in loan payoffs; $43,195 in flooring expenses not approved in the grant agreement; and $5,740 for unknown items. All expenses by the child care center were made after the November 30, 2024, spending deadline; therefore, we questioned the entire $152,128 awarded. • One Family Child Care Home I provider was awarded $23,071. The provider submitted receipts that supported $13,524 in allowable expenses. The remaining $9,547 was not adequately supported, so we questioned the costs. Additional documentation provided was not sufficient to determine if the expense was allowable per the grant agreement. This included several screen shots of toys and other items that appear to be from Amazon, but no prices were listed or other information was missing that was needed to verify the expense was allowable. The grant agreement awarded $20,695 to the provider to install fencing, replace windows, purchase a toilet, and repaint walls with non-toxic paint. The invoice provided for these expenses totaled $21,023 but did not include proof of payment. We requested proof of payment for these expenses, and the provider submitted copies of three handwritten receipts, totaling $13,128, that noted payments were made in cash. We then requested receipts for the remaining $7,895 and asked for bank statements to see if there were large cash withdrawals that corresponded to the large cash payments. The provider did not submit any additional receipts or copies of a bank statement, and she stated that she used cash from her safe for these expenses. She also stated that a new toilet was not installed, but a kid’s toilet set was added to the existing toilet. Pictures were provided to support the installation of the fence, replacement of windows, painting of walls, and kid’s toilet seat. • One child care center was awarded $128,843. The center submitted receipts, totaling $63,749, for allowable expenses. There were two receipts provided that did not appear allowable: a quote for $7,415 for installing a fence with no accompanying proof of payment; and a credit card receipt for $474 that did not include a description of what was purchased. No receipts were provided for the remaining $65,094 grant awarded, and this amount is questioned. • One child care center was awarded $213,945. The center submitted receipts, totaling $211,267, and noted that it had not spent $2,678 of the grant payment. Per a review of the receipts submitted, $144,439 was supported, and $69,506 was not adequately supported and is questioned. The center was awarded $84,985 for external modifications and submitted $138,655 in invoices. The center stated that it underspent money in other categories, so it believed it could use this money towards the external modification category where it installed fencing and turf for the playground. This substitution was not allowed per the grant agreement. Expenses under the External Modification category required a quote, so these additional expenses were not approved and are unallowable. The provider also submitted $4,955 in duplicate receipts and $21,906 in expenses that did not appear allowable for the following reasons: 1) receipts included items noted as unallowable on the Frequently Asked Questions (FAQs) for the REP program; 2) receipts did not include sufficient information to determine whether the expense was allowable; 3) the expense was not approved by the Agency on the application, such as painting, drywall, and electrical work; and 4) no proof of payment was provided for a $2,001 invoice that included labor to build a storage tote rack and to move items in and out of storage, and mileage reimbursement. • One child care center was awarded $84,845. The center submitted receipts, totaling $84,845; however, all items were purchased after the November 30, 2024, spending deadline. Receipts were dated between June 16, 2025, and September 16, 2025. The entire $84,845 grant payment is questioned. • One Family Child Care Home I provider was awarded $14,508. Invoices provided did not support the full amount awarded. We determined only $6,974 of expenses were allowable, resulting in $7,534 in questioned costs. One invoice, totaling $7,750, was for a custom playhouse building and dirt work. We requested proof of payment and pictures of the playhouse. The provider submitted a handwritten receipt for $7,550, which was $200 less than the invoice amount. When asked for a copy of the bank statement, the provider told the Child Care and Development Fund Administrator that her daycare parents pay in cash, and she saved this money to use for the project and did not use the grant money. The provider submitted two pictures of the outside of the playhouse. Per the county gWorks website, it appeared the playhouse was an elevated structure on the property in August 2023, and updates were made to the existing playhouse. It appears a new roof was installed, the existing stairs were removed, and the structure was placed on the ground. No pictures were provided of the inside of the structure, so it is unknown if it is a playhouse. The work appears to have been completed by the provider’s son because the invoice noted that the checks were payable to him. See Schedule of Findings and Questioned Costs for chart/table. Another invoice for $500 was for the assembly of items purchased for the child care center, including two tricycles, three drift bikes, table and chairs, a rock wall climber, and a double tricycle. Payment was due to the provider’s daughter. Again, we asked for proof of payment and were provided with another hand-written receipt. The invoice was dated November 13, 2024, and the receipt was dated October 15, 2025, which raises questions about when the receipt was written. Regardless, it does not appear reasonable for the provider to pay a relative $500 for assembling these items using the grant funds. Federal payment errors noted for the REP sample tested were $388,654. The total sample tested was $688,254, and the total REP payments for the fiscal year were $4,493,424. The REP payment dollar error rate for the sample was 56.48 % ($388,654/$688,254), which estimates the potential dollars at risk for fiscal year 2025 to be $2,537,437 (dollar error rate multiplied by the population). As part of the REP grant monitoring process, the Agency audited 10% of grant payments made to child care providers. There were 122 grant payments, totaling $7,125,998, made during State fiscal year 2024, and 94 grant payments, totaling $4,493,424, made during State fiscal year 2025, for a total of 216 grant payments. The Agency selected 25 grant payments to audit. As of December 9, 2025, four audits were still under review by the Agency. Of the 21 audits completed by the Agency, only 10 of the grant payments passed. The remaining 11 grant payments had various issues. This included expenses after the November 30, 2024, deadline, no receipts or incomplete receipts, items purchased not approved on the application and no quote, quotes not agreeing to invoice vendor or amount, expenses prior to the grant award, and not all funds being spent. Both the Agency’s testing and our random testing identified similar issues with over 52% of grant payments having findings. Therefore, it does not appear that the Agency’s procedures to audit 10% of the payments after the fact was an adequate control. Cause: Inadequate control procedures. The Agency performed audits on only 10% of the subgrants after the fact. Effect: Noncompliance with Federal regulations. Additionally, a lack of adequate supporting documentation increases risk of payments not being made in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure that payments are adequately supported and in accordance with State and Federal requirements. We further recommend the Agency take steps to recover funding that was not spent or was not spent properly. Management Response: The Agency partially agrees. The Restoration and Enhancement Program (REP) frequently asked questions allows for programs to receive an extension to spend funds after November 30, 2024. The program reviewed situations where funds were spent after the spend date and approved based on the provider's justification. The agency has conducted internal audits of child care providers who received grants funded by the American Rescue Plan Act (ARPA). Specific to the REP grant, the program audited approximately 10% (21 child care providers) and after identifying concerns with multiple providers within the initial sample determined an expanded audit was necessary. The Agency is in the process of auditing an additional 50 REP cases and will take appropriate action on any findings from the cases under review. APA Response: The provider’s justifications and the Agency’s approval for spending funds after November 30, 2024, were not provided to us. Additionally, the period of performance ended on September 30, 2024, which raises the question of whether it is appropriate to allow providers extensions to spend the funds.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility & Matching Grant Number & Year: 2401NETANF, FFY 2024; 2301NECCDD, FFY 2023; 2401NECCDD, FFY 2024; 2401NECCDF, FFY 2024; 2501NECCDM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67 (October 1, 2024) states, in part, the following: (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. * * * * (c) Fiscal control and accounting procedures shall be sufficient to permit: * * * * (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. 42 USC § 9858k(b) (1992) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for– (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.55 (October 1, 2024) states, in relevant part, the following: (a) Federal matching funds are available for expenditures in a State based upon the formula at § 98.63(a). (b) Expenditures in a State under paragraph (a) of this section will be matched at the Federal medical assistance rate for the applicable fiscal year for allowable activities, as described in the approved State Plan, that meet the goals and purposes of the Act. To be eligible for services, 45 CFR § 98.20 (October 1, 2024) requires a child to be under 13 years of age, a citizen, and reside with a family whose income does not exceed 85% of the State’s median income. Title 392 NAC 3-001.02(D) requires the recipient and child care provider to ensure that the services are delivered as authorized. Title 392 NAC 3-004.01 states the following: A provider must establish a private pay rate before being approved as an enrolled provider. Child Care Subsidy payments to a provider will not exceed the private pay rate. Title 392 NAC 3-004.01(A) states the following: The Department pays by attendance, not enrollment. Providers do not receive payment when the provider is on vacation, is ill, or is not providing care for some reason unrelated to the child or recipient. Title 392 NAC 4-002 states, in relevant part, the following: Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; * * * * (E) To accept a rate which is reasonable, necessary, and does not exceed the amount charged to private-paying persons; * * * * (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.] The Child Care Subsidy Provider Handbook (June 2023 revision), Section 5 (“Financial Matters”), states, in relevant part, the following: You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided. You should mark “A” on the calendars for children who are absent. Up to five absent days can be billed per child per month. Nebraska Department of Health and Human Services’ Guidance Document for the Child Care Subsidy Program has the following guidance for Title 392 NAC Chapter 2-011, Categories of Eligibility Based on Income: The total amount of the sliding fee assessed will be based on 7% of the household’s gross income for all of their children enrolled in the subsidy program. It will not vary with the number of children in care, the amount of care they need, or the type of care they choose to use. The sliding fee must be paid each month to the provider before the provider bills the Department, it covers the first dollars of payment, regardless of when service begins or ends. The Child Care Subsidy Provider Handbook (June 2023 revision) requires that, for providers other than child care centers, “[P]arents/caregivers must sign the calendar at the end of the billing period.” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2024-045 Questioned Costs: $27,326 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support, did not agree to support, or billed more than authorized, as detailed below. Federal Random Sample We tested 25 child care claims paid with Federal funds. We noted seven claims with errors. Some payments had more than one type of error. • For one claim tested, the household’s income was not calculated correctly, which resulted in the family fee co-pay being incorrectly calculated. The Agency originally calculated the household’s income to be less than 100% of the Federal Poverty Level, and a family fee co-pay was not assessed. However, the household’s income was understated by $2,077, and a family fee co-pay of $315 should have been assessed. • For one claim tested, the rate the provider charged was more than the provider’s private rate. The provider charged $41.40/day, but the provider’s private rate was only $28/day. Additionally, the provider charged $28.70/partial day, but using an Agency-provided conversion table, the partial rate charged should only have been $15.56/partial day. • For five claims tested, the providers billed for more days than what was recorded on the child’s attendance sheet: o One provider improperly billed the Agency for the wrong sibling. o One provider billed for 21 days of child care in a month; however, the attendance calendar only reported 20 days of child care in the month. o One provider billed for 7 full days and 12 partial days of child care in a month; however, the attendance calendar only reported 2 full days and 12 partial days of child care in the month. o For two claims tested, the attendance records were not provided. • For one claim tested, the attendance record was not signed by the parent, as required for providers other than child care centers. Federal payment errors noted for the sample tested were $2,679. The total Federal sample tested was $12,979, and total child care Federal assistance claims for the fiscal year were $85,359,477. Based on the sample tested, the case error rate was 28% (7/25). The dollar error rate for the sample was 20.64% ($2,679/$12,979), which estimates the potential dollars at risk for fiscal year 2025 to be $17,618,196 (dollar error rate multiplied by the population). In addition to the $2,679 in questioned costs noted on the sample items tested, we noted $446 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation. Excessive Units The Nebraska Family Online Client User System (NFOCUS) application was used to automate benefit/service delivery and claim processing and payments for the Child Care program. Due to the volume of claims processed by the NFOCUS application, the Agency did not perform a review of each claim paid. Therefore, the Agency relied on edit checks within the system to review claims and deny or suspend claims that did not meet the criteria determined by the Agency. In the prior year audit, on Finding 2024-015, we noted that the “UN” edit check (“Units too high for service dates and frequency”) was incorrectly bypassed on claims submitted and interfaced through the Child and Family Services Provider online claims portal, which appears to have been properly corrected in January 2025. However, the Agency posted several journal entries to charge the Federal child care grants during fiscal year 2025 for claims that occurred prior to January 2025. Therefore, numerous claims charged to the Federal child care grants during fiscal year 2025 did not have the “UN” edit check properly applied to them. We identified 865 lines paid with Federal funds, totaling $368,795, where the number of days or partial days billed exceeded the number of days in the service period. We selected 24 claim lines, totaling $33,870, for review and noted 16 claim lines with errors as follows: • The claims charged to Federal funds were “Version 1” of the claim. Sometimes an error is detected, and a “Version 2” of the claim is created with an underpayment or overpayment. We noted that 12 of the claim lines tested had a Version 2 where overpayments were created. However, the overpayments collected and recouped are credited to the State General Fund, not Federal funds. The 12 claim lines totaled $17,256 and are considered Federal questioned costs. Errors noted included two claim lines that billed 120 partial days for a 28-day period. The errors were discovered, and a Version 2 was created on January 18, 2025, but on January 30, 2025, the Agency moved the Version 1 claim to Federal funds, resulting in the Federal grant being overcharged. • Four claim lines did not agree to the attendance records, resulting in Federal questioned costs of $6,945. o One provider billed 37 partial days and 13 days for one month, when the attendance record only supported 19 days. o Another provider billed 58 partial days and 10 days for a 15-day period. The attendance record only supported 10 days. o A third provider billed 168 partial days in a 29-day period, which is not feasible. The attendance record only supported 12 partial days. o The last provider did not provide the attendance record. The provider billed 37 partial days and 15 days for one month. State Matching Claims States are required to match the Federal funds spent with the Federal Matching grant with State funded expenditures at the Federal Medical Assistance Percentage (FMAP) rate for the applicable fiscal year. Those State funding expenditures must be an eligible and allowable activity per the State Plan. The Agency periodically performs journal entries to move child care claims to the applicable business unit to identify and track the State matching expenditures. During the fiscal year, the Agency moved $10,560,322 of child care claims paid with State General funds to the business units for State matching expenditures. We tested 25 child care claims paid with State matching funds. We noted six claims with errors. • For one claim tested, the rate the provider charged was more than provider’s private rate. The provider charged $40/full day and $36/partial day, but the provider’s private rates were only $37/full day and $27/partial day. • For one claim tested, the provider billed for child care over the authorized amount. The provider was authorized 41 hours of child care a week; however, per the attendance sheet, the child received over 46 hours for one week tested. • For four claims tested, the providers billed for more days than what was recorded on the child’s attendance sheet. o One provider billed for 28 full days and 15 partial days, while the attendance sheet reported 27 full days and 0 partial days. o One provider billed for 8 full days and 5 partial days, while the attendance sheet reported 10 full days and 0 partial days. o One provider billed 13 full days and 6 partial days, while the attendance sheet reported 10 full days and 6 partial days. o One provider recorded full days of service from 8:00 a.m. to 5:00 p.m. for nine hours of service each day for the claim tested. The total number of days billed was 21 full days. However, according to the school calendar, school was in session for 15 of the 21 days billed; therefore, it is unreasonable that the provider provided services during the entire time billed. Payment errors noted for the sample tested were $943. The total sample tested was $10,490, and total child care matching claims for the fiscal year were $10,560,322. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate for the sample was 8.99% ($943/$10,490), which estimates the potential dollars at risk for fiscal year 2025 to be $949,373 (dollar error rate multiplied by the population). Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and claims are in accordance with regulations. The edit check “Units too high for service dates and frequency” was incorrectly bypassed on claims submitted and interfaced through the Child and Family Services Provider online claims portal prior to January 2025. Effect: Ineffective review of claims increases the risk for errors, fraud, and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We also recommend the Agency ensure billing documents agree with attendance sheets. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2501NECCDF, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2024), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] 391 NAC 1-005.02 provides the following: The Department will conduct an unannounced inspection each year to assess compliance with licensing regulations. A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers. A similar finding was noted in prior audits since 2017. Repeat Finding: 2024-046 Questioned Costs: None Statistical Sample: No Context: Child care centers and family child care homes are subject to health and safety requirements. Each type of provider is subject to separate but similar State regulations. We tested 25 child care providers subject to health and safety requirements. We noted the following: One child care center tested did not have a sanitation inspection within the last two years. The last sanitation inspection was completed on February 14, 2023, four months overdue as of June 30, 2025. The Agency submitted a referral on February 14, 2025, for the next inspection due; however, the Agency did not provide documentation to support follow-up was completed on the referral. For a school-age-only child care center, the last sanitation inspection was completed on September 19, 2025, according to an email provided by the Agency from the Douglas County Health Department. However, a copy of the inspection report was not provided to us; therefore, we could not verify whether the health and safety requirements were met. Five of 20 child care centers tested did not have a fire inspection within the last two years: See Schedule of Findings and Questioned Costs for chart/table. The referrals sent for three of the overdue fire inspections were not made timely. The Agency did not provide documentation to support that any follow-up was completed on the referrals. As of the end of fieldwork on January 8, 2026, no follow-up had been done for almost 8 months to over 19 months. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Allowable Costs/Cost Principles Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 1356.60(b)(1) (October 1, 2024) states, in part, the following: Federal financial participation is available at the rate of seventy-five percent (75%) in the costs of: (i) Training personnel employed or preparing for employment by the title IV-E agency administering the plan, and; (ii) Providing short-term training (including travel and per diem expenses) to current or prospective foster or adoptive parents[.] Per 45 CFR § 1356.60(c), Federal financial participation is 50% for administrative expenditures. The Public Assistance Cost Allocation Plan (PACAP) has the following description for the Protection and Safety New Worker Training 75% cost center: This cost center contains training costs for CFSS staff during their training period of the first six months of service. There are approximately 70 trainees in the Children and Family Services Training Program at any one time. The cost center also includes the interagency agreement with the University of Nebraska to manage and deliver the training program. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State accounting system to ensure that amounts charged to the Federal programs are proper. Condition: The Agency incorrectly charged payroll costs to the Protection and Safety New Worker Training 75% cost center. Repeat Finding: No Questioned Costs: $3,304,598 known ($650,976, 2401NEFOST; $2,653,622, 2501NEFOST) Statistical Sample: No Context: During testing of Foster Care payroll, we noted that 337 employees were included in the Protection and Safety New Worker Training 75% cost center, which is 267 more than what was included in the cost center description within the PACAP of 70 workers. After further review, we noted that 296 employees were incorrectly coded to the Protection and Safety New Worker Training 75% cost center, resulting in $3,304,598 in Federal questioned costs. Cause: The Agency was not timely updating employees’ coding within its payroll system when a Child and Family Service Specialist (CFSS) Trainee was promoted. Effect: When the payroll system is not timely and correctly updated when employees’ job changes, there is an increased risk of Federal programs being charged incorrectly. Recommendation: We recommend the Agency strengthen procedures to ensure payroll is recorded properly. Management Response: The Agency agrees with the finding.

Program: AL 93.658 – Foster Care Title IV-E – Allowable Costs/Cost Principles Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. Per 45 CFR § 75.303 (October 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the Public Assistance Cost Allocation Plan’s (PACAP) RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the PACAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Additionally, for two quarters tested, we noted that the number of RMTS surveys generated and validated were not in compliance with the PACAP. Repeat Finding: 2024-040 Questioned Costs: $29,201 known ($16,314, 2401NEFOST; $12,887, 2501NEFOST) Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 validated RMTS surveys and noted that inadequate documentation was provided on 13 surveys. For 9 of 16 surveys tested, the workers erroneously reported that they were working on a Foster Care IV-E case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. For one of six surveys tested, the worker erroneously reported he was working on an Alternative Response case when the survey should have been reported as Child Protection Initial Assessment. For 3 of 12 surveys tested, the worker erroneously reported working on a Child Protection Initial Assessment. • For one moment, the worker was conducting a family team meeting for a Foster Care Non IV-E case. The worker incorrectly reported that he was working on an Initial Assessment. • For one moment, the worker gave a response to the RMTS survey; however, we were unable to find what case she was working on. The Agency was unable to determine if coding to Child Protection Initial Assessment was correct. • For another moment, the worker responded that she was preparing for a training on the Child And Family Services Review (CFSR), which is not related to the Child Protection Initial Assessment. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below: See Schedule of Findings and Questioned Costs for chart/table. According to the PACAP, 2,761 RMTS surveys are generated per quarter for each cost pool (SSW and Children Family Services Specialists (CFSS)) for a total of 5,522 moments. Additionally, 10% of all RMTS surveys generated are selected at random to participate in a subsample. The subsamples are validated by the worker’s supervisor. We selected the quarters ended September 2024 and March 2025 for testing. We noted the number of RMTS surveys generated were not in compliance with the PACAP as follows: See Schedule of Findings and Questioned Costs for chart/table. There were 552 RMTS subsamples for each quarter tested for a total of 1,104. This does agree to the subsample requirement in the PACAP. However, only 500 of the RMTS subsample surveys were validated, leaving 604 moments not validated. Due to the low number of subsample moments validated, we were unable to complete testing of supervisors validating the subsample moments and it was determined to be an ineffective control. The Agency noted supervisors should be trained in the completion of the RMTS form, validation process, and the importance of accurate and timely validation response. We asked the Agency for documentation to support that supervisors had been trained in the RMTS process. The Project Analyst provided training compliance reports for both economic assistance and protection and safety employees. The training compliance report for economic assistance for the fiscal year included 83 supervisors with 37 who completed the training for a 44.6% completion rate. The training compliance report for protection and safety workers for the fiscal year included 172 supervisors with 100 supervisors who completed the training, a 58.1% completion rate. Due to the low percentage of supervisors completing the training, this was determined to be an ineffective control of the RMTS process as well. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. The Agency did not have adequate documentation of supervisor training on the RMTS survey process. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. We also recommend supervisor training is completed and adequately documented. Management Response: The Agency agrees with the finding that system-generated subsample moments were not adequately validated. It should be noted, however, that the required number of surveys were validated, just not as the system was intended to be used via the subsample generation process.

Program: AL 93.658 – Foster Care Title IV-E – Allowability Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2024), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2024) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002 states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (June 2023 revision), Section 5, states, in relevant part, “You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided.” Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not have adequate documentation on file to support that payments were in accordance with Federal and State regulations. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings states the corrective action is completed. Repeat Finding: 2024-050 Questioned Costs: $256 known (2401NEFOST, $195; 2501NEFOST, $61) Statistical Sample: No Context: We tested 25 Foster Care claims for maintenance. Foster Care maintenance payments include payments to foster parents and payments to licensed child care providers for child care when work responsibilities preclude foster parents from being at home. For five of the claims, the providers billed for more days than what was recorded on the child’s attendance sheet, as noted in the table below. See Schedule of Findings and Questioned Costs for chart/table. For a separate claim tested, the attendance calendar provided appeared to be prepared by the provider after it was requested by the Agency as the calendar was for services in September 2024, but the calendar was noted as being prepared and signed on December 3, 2025. We questioned costs of $23, which is in-sample. Federal payment errors noted in the sample were $202. The total Federal sample tested was $10,052, and the total Federal maintenance payments during the year were $7,295,988. Based on the sample tested, the dollar rate error was 2.01% ($202/$10,052), which projects the potential dollars at risk for fiscal year 2025 to be $146,649 (dollar error rate multiplied by the population). In addition to the $202 questioned costs noted on the sample items, we noted $54 of questioned costs on other line items of the claims reviewed. Cause: Inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both noncompliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation is maintained to support that expenditures are allowable and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Allowability Grant Number & Year: 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2024), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2024) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Good internal control requires procedures to ensure expenditures are reasonable, accurate, and adequately documented. Condition: The Agency did not have adequate procedures to ensure that Tribal administrative payments were coded properly. Repeat Finding: No Questioned Costs: $10,494 known Statistical Sample: No Context: We tested four Foster Care contract payments. For one of the payments tested, we noted that the payment was not properly coded in the State’s accounting system and overcharged the Foster Care grant. The payment was to a Tribal entity to reimburse its administrative costs related to child protection and safety services. The total amount that should have been charged to the Federal grant was $77,879; however, the Agency improperly coded $88,373 to the Federal grant, resulting in $10,494 being overcharged. Upon further review and discussion with the Agency, payments to this Tribal entity for the months of July 2024 to September 2025 overcharged $127,628 to the Federal grant. Federal payment errors noted in the sample were $10,494. The total Federal sample tested was $270,143, and the total Federal contract payments in the population were $3,486,052. Based on the sample tested, the dollar rate error was 3.88% ($10,494/$270,143), which projects the potential dollars at risk for fiscal year 2025 to be $135,259 (dollar error rate multiplied by the population). Cause: Employee error. The Agency’s spreadsheet to calculate the split coding for the payments was not set up properly. Effect: Without adequate oversight procedures, there is an increased risk of payments not being coded properly, resulting in the Federal grant being overcharged. Recommendation: We recommend the Agency improve procedures to ensure that payments are properly coded in the State’s accounting system. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Reporting Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. 45 CFR § 75.302 (October 1, 2024) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. . . . Condition: The Agency lacked adequate procedures to ensure the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended September 30, 2024, and March 31, 2025. During our review, we noted clerical errors that included the following: 1) the Agency’s supporting spreadsheets not agreeing to the actual reports; 2) using the incorrect amounts for calculating prior period adjustments; 3) reporting the same costs multiple times; and 4) calculating the incorrect percentages for reporting Bridge to Independence expenses. See the tables below for the net errors noted. See Schedule of Findings and Questioned Costs for chart/table. Cause: Clerical errors and inadequate review. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees.

Program: AL 93.659 – Adoption Assistance – Allowability Grant Number & Year: 2501NEADPT, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2024), the Agency must do the following: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.302(a) (October 1, 2024) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (June 2023 revision), Section 5, states, in relevant part, “You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided.” Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: We noted that two of five Adoption Assistance payments tested, which were for child care, did not have adequate documentation on file to support that the payments were in accordance with Federal and State regulations. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2024-051 Questioned Costs: $1,025 known Statistical Sample: No Context: We tested five assistance claims and noted the following: • For one claim tested, the Agency was unable to obtain the attendance calendar from the provider. With no attendance calendar, we were unable to verify the payment amounts were accurate, resulting in total Federal share questioned costs of $906. • For another claim tested, the provider billed for eight full days and eight partial days of child care, while the attendance calendar for the child showed only nine full days and zero partial days of child care, resulting in questioned costs of $119. Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both noncompliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation is maintained to support that expenditures are allowable and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.659 – Adoption Assistance – Level of Effort & Reporting Grant Number & Year: 2401NEADPT, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. EnterpriseOne is the official accounting system of the State. 45 CFR § 75.302 (October 1, 2024) states in part: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per Instructions for Completion of Form CB – 496: Line 12. Reporting Period - Expenditures of Adoption Savings On Other Title IV-B or Title IV-E Allowable Services (from line 8 amount) – This line consists of the actual title IV-E agency expenditures (without federal matching funds) of calculated cumulative adoption savings for the purposes of providing title IV-B or title IV-E allowable services other than those specified for reporting on lines 10 and 11 of this Part. Title IV-E agencies are required to enter into an adoption assistance agreement with the prospective adoptive parents of any child who meets specified criteria by applying differing, and less restrictive, program eligibility criteria. This results in some number of children who, under previously applied program eligibility criteria, would not have been determined as Title IV-E eligible, but who will now be determined as Title IV-E eligible for adoption assistance. Each Title IV-E agency is required to calculate and spend an amount equal to any savings in Title IV-E agency expenditures as a result of applying the differing program eligibility criteria for a Federal fiscal year for services permitted under Title IV-B or IV-E. These non-Federal funds are referred to as “adoption savings.” The State is required to spend an amount equal to any adoption savings in State expenditures for a fiscal year for any services that may be provided under Title IV-B or IV-E. Per 42 USC 673(a)(8)(D)(ii) “Any State spending required under clause (i) shall be used to supplement, and not supplant, any Federal or non-Federal funds used to provide any service under part B or this part.” Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not have adequate procedures to ensure Federal Financial Reports (FFRs) were accurate. Adoption Savings reported were not in accordance with Level of Effort requirements. The Summary Schedule of Prior Audit Findings states the corrective action is completed. A similar finding was noted in the prior audit. Repeat Finding: 2024-052 Questioned Costs: None Statistical Sample: No Context: We tested Part 4 of the September 2024 report for the Annual Adoption Savings Calculation and Accounting Report. We noted the following: • Line 12, Expenditures of Adoption Savings on Other Title IV-B or IV-E Allowable Services, reported $558,014, but $413,076 of these expenditures should not have been included. These expenditures were paid with Federal funds and State matching funds and, therefore, are not allowable uses of Adoption Savings. • Line 13, Total Expenditures of Calculated Adoption Savings, was overstated by $413,076 due to the error noted on Line 12. The Agency’s Corrective Action Plan stated that it updated both its FFR procedures/instructions to include steps to review Level-of-Effort Requirements and the amounts reported on its September 2023 Annual Adoption Savings Report. We received the Summary Schedule from the Department of Administrative Services on August 6, 2025. However, when we reached out to the Agency on January 28, 2026, the Agency stated it had not completed the corrective action. Cause: Inadequate review procedures. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Grants to States for Medicaid – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2405NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2024) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 45 CFR § 75.405(b) (October 1, 2024) states, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 45 CFR § 75, Appendix V, Subsection (G)(2), (October 1, 2024) states the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 45 CFR § 75, Appendix V, Subsection (G)(4), (October 1, 2024) states, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev. Stat. § 81-1120.22 (Reissue 2024) provides the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 45 CFR § 75.444(a) (October 1, 2024) states, in relevant part, the following: For states . . . , the general costs of government are unallowable. . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . ; (2) Salaries and other expenses of a state legislature . . . [.] A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically, so charges are appropriate for the services provided. • Maintenance of adequate documentation to support both rates charged and the approval thereof. • Periodic review of internal service fund balances to ensure revenues are not in excess of expenses. Condition: The Agency lacked adequate documentation to support the rates charged by the Office of the Chief Information Office (OCIO). Additionally, the Agency’s Material Division lacked adequate documentation to support service rates charged for the Print Shop. Furthermore, we noted also that the Agency lacked adequate documentation to support the allocation of security costs in developing building rental rates. Lastly, the OCIO Internal Service Fund Balance was greater than 60 calendar days for cash expenses for normal operations incurred. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2024-029 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) As noted in prior audits, the OCIO lacked adequate support for service rates charged. The Agency was in the process of developing a standard procedure for each rate, but no changes were made for fiscal year 2025. In that year, the OCIO receipted $27,337,548 in Federal dollars for services performed for Federal programs. Of this amount, $15,736,395 was charged to Medicaid. As the rates were unsupported, the amount of questioned costs could not be determined. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of updating its rates through a new methodology, but no changes were made for fiscal year 2025. Receipts from sales for that year totaled $3,171,998. As the rates were unsupported, the amount of questioned costs could not be determined. Building Division The rental rate charged to agencies for building space includes an allocation for security costs. We noted that neither the State Capitol Building (Capitol) nor the Governor’s residence was allocated any costs for security, even though both locations have security. Because these locations were not allocated any security costs, Federal programs could be overcharged. Moreover, security costs to the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2025 indirect allocations for security total $1,137,662. OCIO Internal Service Fund Balance Per the Agency’s calculation, as of June 30, 2024, the OCIO Internal Service Fund Balance for allowable costs was $26.743 million; however, the allowable reserve was only $20.826 million, a difference of $5.917 million. The Agency has not completed its calculation for June 30, 2025; however, per the APA’s review of the State accounting system, the fund balance has increased by over $9 million during State fiscal year 2025 and was significantly larger than the allowable reserve at June 30, 2025. Cause: Procedures are inadequate to ensure that rates are sufficiently supported, and the Internal Service Fund Balances do not exceed allowable thresholds. Effect: Without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services, and the Agency’s internal service funds will exceed the allowable threshold per Federal regulations. When security costs are not allocated to all buildings in an equitable manner, moreover, the risk of Federal programs not being charged in accordance with Federal cost principles is increased. Recommendation: We recommend the Agency review its allocation of security costs to ensure that such costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. Lastly, we recommend the Agency implement procedures to ensure fund balances do not exceed the allowable threshold. Management Response: The OCIO agrees with the finding as it is the result of rates calculated 18-24 months in advance of the period under review as this was the 2nd year of the State’s fiscal biennium. Efforts have been made to both reduce the number of rates for clarity as well as right size the rate to align with cost recovery expectations more effectively. In addition, OCIO will be engaging in a period of “no-bills” to customer agencies to draw down the identified federal funds OCIO had previously collected and are in excess of the 60-day allowable threshold. The Print Shop is reviewing other options to provide Printing Services to state agencies. DAS Building Division - The methodology for the allocation for security (an Indirect Cost) is a management decision and there have been no changes in the allocation methodology. APA Response: As noted above, security costs to the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. This is true regardless of any management decision.

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2201NETANF, FFY 2022; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2301NECCDD, FFY 2023; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “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 Federal award.” 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020) and the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”), “[a] government program may not be reimbursed in excess of its actual costs, i.e., make a profit.” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that, when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: Inadequate procedures to ensure the accuracy of journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP), resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-037 Questioned Costs: $3,986,559 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 14 journal entries related to the PACAP. We noted the following: • Four journal entries to reconcile Foster Care Title IV-E expenditures to the PACAP contained multiple errors, including using aid amounts as administrative costs, miscalculating the portion of the Bridge to Independence (B2I) program that can be charged to the grant, not accounting for all amounts already charged to the grant, and adding in additional amounts earned that did not exist or were calculated incorrectly. For one entry, the Agency not only calculated the wrong amounts to charge to the grant, but then posted the exact same entry from the previous quarter instead of the current quarter’s entry. In total, $306,667 was overcharged to the Foster Care Title IV-E grant due to these errors. We consider this amount to be Federal questioned costs. • Another journal entry for Foster Care Title IV-E was posted to correct an error in previous quarters’ journal entries. The Agency was charging program-related training costs at a 50% Federal financial participation rate (FFP), while such activity is allowable at a 75% FFP. However, the Agency did not correctly account for all the costs that had already been charged to the grant for training costs. This error led to the Agency charging an additional $1,777,318 in costs to the Federal award that was already charged to the grant. We consider this amount to be Federal questioned costs. • One journal entry was to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP. The Agency’s calculation included costs earned by the Summer EBT program but failed to include amounts already charged to the Summer EBT Federal grant of $72,292. Additionally, the Summer EBT program is a separate Federal grant from SNAP and should have been accounted for separately. The full $72,292 is the Federal portion and is considered questioned costs. • One journal entry to reconcile Medicaid administrative expenditures to the PACAP did not properly account for $35,114 in personnel costs that had already been charged to the grant. As a result, the Federal funds were overcharged this amount and are considered questioned costs. • One journal entry to allocate costs related to Field Office Administration to various programs across the Agency for the month of March 2025 was calculated incorrectly and did not account for all programs involved. Each quarter, Field Office Administration costs are allocated in the PACAP to various programs based on hours worked in the field offices. The journal entry tested was meant to do the same calculation, but on a monthly basis, so programs can keep track of their budgets more timely. When calculating the amounts to allocate, however, the Agency used six months of costs, or $1,798,755, rather than just the costs that occurred in March 2025, or $171,255. Further, the Agency did not move the costs to all of the applicable programs, such as Foster Care and SNAP. Lastly, the Agency used the Labor Hours from the quarter ending December 31, 2023, rather than the quarter ending March 31, 2025. Due to these errors, Medicaid was overcharged $131,637, which are considered Federal questioned costs. • For one journal entry to move costs from the State General Fund to a Cash Fund for $1,766,949, the Agency used the incorrect business units within EnterpriseOne, which resulted in multiple Federal programs being overcharged through the PACAP, as listed below. We consider these to be Federal questioned costs. See Schedule of Findings and Questioned Costs for chart/table. We also selected six adjustments made to the PACAP and noted the following: • Two adjustments tested were related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district, and the amounts owed to each school district, for the Federal share of expenses. Schools are responsible for covering matching funds. The Agency makes an adjustment to the Cost Allocation Plan to account for the matching funds that are not shown on the State Accounting records. However, we noted that the Agency is calculating this adjustment based on the amount of allowable expenses provided by the contract, and not the actual amount of Federal funds paid to the schools. The Agency reduces the amount to pay to the schools for missing provider enrollment, negative claims, and/or recoupments. We then reviewed the CMS-64 reports and noted that the Agency is claiming the entire amount of allowable expenses provided by the contractor, and not just the amount paid to the schools. It is not reasonable to claim costs on the CMS-64 reports that are not actually spent. We recalculated the amounts that should have been reported based on the actual amounts paid to the schools and noted that the Agency overclaimed $566,018 in Federal costs. Of the $566,018, $110,970 is due to a 3% fee for administration that the Agency subtracts from each school’s payment. The Agency then essentially pays itself this amount through a reconciliation journal entry. Administrative costs of the Agency are distributed through the PACAP to benefiting programs and would include charges to Medicaid; therefore, the Federal portion of the 3% administrative fee should have been credited back to Medicaid, but it was not. The $566,018 is considered Federal questioned costs. • Two adjustments tested were to correct prior period allocation errors. Both errors were due to a finding from the Fiscal Year 2024 Single audit. The Agency’s calculations to correct allocations included errors, such as using the incorrect statistics, using the incorrect amounts, and inputting the incorrect amounts into the cost allocation system. These errors resulted in the following programs being overcharged. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper, and journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees with the finding.

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.090 – Guardianship Assistance; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2501NEGARD, FFY 2025; 2201NETANF, FFY 2022; 2401NESCSS, FFY 2024; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2401NECCDD, FFY 2024; 2501NECCDD, FFY 2025; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “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 Federal award.” 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. Good internal control and sound accounting practices require policies and procedures to ensure that all administrative costs are allocated to the proper funding source for activities performed. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: The Agency did not properly charge Federal programs for 9 of 27 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2024-038 Questioned Costs: $2,743,946 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 27 PACAP allocations. We noted errors for 9 of 27 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharged to be questioned costs. We noted the following: RMTS Allocations For four of four allocations tested based on the Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs. Additionally, costs were included in the allocations that were either misassigned or unrelated to the cost centers being allocated. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The September quarter allocation included 4,481 activity observations and the March quarter included 4,402 observations. We noted the following: o Four responses were invalidated by supervisors; however, these responses were originally left blank as they were not completed by employees. This resulted in four additional responses being created as activities funded by the State. o For two responses that were not included in the sub-sample for supervisory review, the supervisor performed a review and invalidated the moments. As these were not originally selected for supervisor review, this invalidation resulted in two additional responses being created and recorded as activities funded by the State as well as the original responses remaining under their original funding source. o One response was originally recorded as SNAP and was later invalidated by the supervisor. This moment was incorrectly not moved to “Non-DHHS Activity” and remained coded as SNAP on the final allocation. • The Agency did not properly allocate observations in accordance with the PACAP for 7 of the 81 activities in the quarter ended September 31, 2024, and 2 of the 75 activities in the quarter ended March 31, 2025: o Six of the observations included Child Protection Initial Assessment. Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. The Agency did not properly update the formula used to calculate each quarterly allocation for Child Protection Initial Assessment from the previous quarter. In both quarters tested, this resulted in overcharges to the Adoption and Guardianship programs and undercharges to the Foster Care program. o Two of the observations should have been allocated evenly between SNAP and the State; however, the observation was incorrectly allocated three ways, between SNAP, the State, and the Social Services Block Grant Program (SSBG). This resulted in overcharges to SSBG and undercharges to SNAP and the State. o One of the observations should have been allocated with two-thirds to the Temporary Assistance for Needy Families Program (TANF) and one-third to SNAP; however, the observation was incorrectly allocated evenly between TANF and SNAP. This resulted in overcharges to SNAP and undercharges to TANF. Additionally, two business units were misassigned to the RMTS allocations. • One business unit with total charges of $125,246 during State fiscal year 2025 was assigned to the Economic Assistance RMTS allocation when it should have been assigned to the P&S RMTS allocation. Impacts of this error included undercharges to Foster Care and overcharges to SNAP. • The second business unit with total charges of $5,433,458 during State fiscal year 2025 was assigned to the P&S RMTS; however, it should not have been assigned to either RMTS allocation as the costs were related to the Youth Rehabilitation Treatment Center in Kearney, Nebraska. This resulted in overcharges to Federal programs, including Foster Care and Adoption Assistance. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Time Study Allocation One allocation tested was based on a time study of the Legal and Regulatory Services Team for the quarter ended March 31, 2025, which allocated $1,126,957 of administrative costs. The time study was completed annually by the attorneys of the Legal and Regulatory Services Team. We noted the following issues regarding the time study and the allocation tested. • The Agency’s processes and procedures for the time study were not adequately defined in the PACAP, and there were no written processes and procedures for how the time study would be completed. • The time study used for the basis of the allocation tested consisted of only 26 of the 33 attorneys that were part of the team, and the time study was only conducted during a two-week period. Additionally, a paralegal also completed the time study, which was against the Agency’s stated procedures. • An Internal Auditor’s payroll costs were also included in the allocation; however, the Internal Auditor was not part of the Legal and Regulatory Services Team. This resulted in $16,281 in misallocated costs. • Hours coded on the time study for “Child Welfare” were all allocated directly to Foster Care; however, the “Child Welfare” hours should have also been allocated to Adoption, Guardianship, and other State programs. • Hours coded on the time study for “TANF” were incorrectly charged to LIHEAP. As the same time study was used for allocations for all four quarters of the State fiscal year 2025, we calculated the impact for all four quarters. Questioned costs by program for the Time Study allocation are as follows: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $39.5 million in costs were allocated using these counts during the State fiscal year 2025. We tested the allocation for the quarter ended September 30, 2024, and noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers they used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for the allocation tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for the quarter tested and overcharging all other programs in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP, for September 2024 as of August 2025. The detailed report did not agree to the summary spreadsheets. • Other recipient counts were off due to clerical errors: o The recipient count for the TANF Solely State Funded Plan was incorrect. The recipient count used by the Agency was zero, but the supported number was 2,017 recipients. o The recipient count for SNAP included 1,609 more recipients than what was supported. Having recalculated the quarter’s allocation, based on the supported recipient counts available, we have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 36 cost centers allocated to State and Federal programs through labor hours. Over $295.6 million in costs were allocated by labor hours during the 2025 State fiscal year. We tested seven of these allocations, and one had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. For the allocation tested for Cost Center 25C23545, we noted that five business units related to Home and Community Based Services were being incorrectly mapped to Cost Center 25C23545. Additionally, the labor hours statistic should have allocated the costs throughout the Finance and Program Integrity Section, but it only allocated costs to one unit within this section. These errors resulted in CHIP being overcharged $85,174. Time and Effort Report Allocations We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended September 30, 2024, which allocated $1,077,853 of administrative costs, based on Time & Effort reports. During testing, we noted the payroll costs for 71 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees included three Child and Family Services Specialist Supervisors (CFSSS), and a Program Specialist. The three CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Because of this error, the following programs were overcharged. See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $17,529,039 in project costs for State fiscal year 2025. The iServe Nebraska Portal, which is an online application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021 and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs only to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that are utilizing, or intend to utilize, the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated the following: As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan. In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the previous fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The allocation method was last updated by the Agency, and approved by the Federal grantor, as of September 28, 2023, to include the Child Care program and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program (AABD) and State Disability Program (SDP). However, the Agency-provided implementation date for Child Care, AABD, and SDP was the same as the implementation date for the initial four programs, July 26, 2021. So it remains unclear why all benefiting programs were not being included in the allocation of this cost center from the start of implementation. • The SSBG program began implementation in October 2023 and went live in April 2024, but no costs have been allocated to this program. Similarly, the Refugee Assistance program began implementation in March 2024 and went live in July 2024, but no costs have been allocated to this program either. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2025 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure the following: employee pay is recorded correctly; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency agrees with the finding.

Program: AL 93.778 – Grants to States for Medicaid – Allowability Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2024) states, “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” Per 45 CFR § 75.403 (October 1, 2024), costs must be reasonable, necessary, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately document services provided in the EVV (Electronic Visit Verification) system, and confirm that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states that the provider can provide services to only one client at a time, and services will not be paid unless performed during the actual hours noted in the EVV system. Title 471 NAC 15-005.01(A) states that the provider will comply with all EVV billing requirements. A good internal control plan requires procedures to ensure services provided agree to the service needs assessment or individual support plan and service authorization. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) In General. Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: “(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— “(i) for calendar quarters in 2019 and 2020, by .25 percentage points; “(ii) for calendar quarters in 2021, by .5 percentage points; “(iii) for calendar quarters in 2022, by .75 percentage points; and “(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person’s intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) and personal care service claims, we noted the following: • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without the verification of the location the services were provided. • Services billed exceeded the number of hours authorized. • PAS and personal care services appeared to be claimed at the same time the provider was working at another job, resulting in apparently fraudulent billings and payments. • The PAS and other employment hours exceeded 24 hours in one day for one client, which is not possible. • The PAS and personal care providers had the ability to edit the billable start and end times in the EVV system. • The Agency authorized a PAS provider to perform services for three clients, totaling up to 118 hours a week, which is unreasonable. • Providers billed for unfeasible scenarios, such as the supposed performance of duties that were supposed to be done once a week but were billed as being done every day. Similar findings have been noted in prior audits since 2014. Repeat Finding: 2024-053 Questioned Costs: $11,136 known ($11, 2405NE5MAP; $11,125, 2505NE5MAP) Statistical Sample: No Context: The Agency offers personal assistance services (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency also offers personal care services under the Aged and Disabled (AD) Waiver to recipients with disabilities. These services enable the participants to carry out tasks that they are unable to perform because of their disabilities. The Agency implemented an electronic visit verification (EVV) system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century CURES Act, passed by Congress in 2016. The EVV system electronically captured and verified provider visit information and providers were required to submit claims to the Agency electronically through this application. We judgmentally selected four providers and a PAS agency based on high total dollars. For those providers, we selected one week of claims for testing, and one month of claims for the PAS agency for testing. We also randomly selected five PAS payments for testing and, from there, one week of claims was tested. In addition to the billing issues identified for the weeks tested, we noted two of these providers had outside employment that conflicted with the PAS hours billed. We expanded testing for these two providers. We identified $13,044 in potentially fraudulent payments made to the providers during fiscal year 2025. In addition to the potentially fraudulent payments related to hours claimed while at another job, we noted $6,315 payment errors related to other issues. Total Federal share questioned costs were $11,136. The Federal share of payments tested totaled $18,927. See Schedule of Findings and Questioned Costs for chart/table. The total Federal share of PAS claims paid for the fiscal year was $6,212,765, and the State share of PAS claims paid for the fiscal year was $4,334,744. The following information describes issues noted with each provider. Judgmental Testing Provider #1 For the initial week tested, the provider was authorized a total of 39.75 hours per week for a PAS client and 40 hours per week for a client who received personal care services through the AD Waiver program. The provider did not follow the SNA when billing for tasks for the PAS client. The SNA authorized some tasks to be completed seven days a week, but the provider billed on only three days. For example, the provider was authorized to receive assistance on and off the toilet six times per day for seven days per week, but the provider performed services on only three days. We consider the services billed on the other four days to be overpayments. We identified 18.5 hours that were overbilled. We did not question costs for these hours because they were included in the hours questioned as potential fraud described below. The provider used the Global Positioning System (GPS) verification method for the initial week tested, and we noted that some of the times billed did not seem reasonable for both the PAS and personal care clients. For example, the provider billed 22.5 hours from 10:39 a.m. on June 1, 2025, to 9:00 a.m. on June 2, 2025, for the personal care client. We also noted three instances during the week where the provider changed the end times of the visit – most likely to avoid exceeding the service authorization. The claim form in the EVV system included the scheduled end time, the actual service end time, and the billable service end time. The ability to edit the billable start and stop times recorded in the EVV system, with no secondary review, places doubt on whether the services were performed as billed. These two clients lived with the provider making it convenient to clock in and out as the provider pleased. See the table below: See Schedule of Findings and Questioned Costs for chart/table. The provider not only billed for 79.5 hours of PAS and personal care services in the week tested but also worked full-time for a family counseling business. Due to all of these issues, we reviewed the claims submitted for a three-month period from March 31, 2025, through June 25, 2025. We obtained employment records from the family counseling business and compared the PAS and personal care billings to the employment records. During this comparison of records, we noted also that the provider was billing independent living services through the Home and Community-Based Services (HCBS) Waiver. We identified 70 days during which PAS, personal care hours, and independent living services overlapped with times that the provider was recorded as having been working for the family counseling business. For 45 days out of the three months, the total Medicaid and employment hours exceeded 24 hours, which is impossible. See examples for two days in the table below: See Schedule of Findings and Questioned Costs for chart/table. The visits were completed through a device using GPS. As stated earlier, the PAS and personal care clients lived with the provider. The independent living services were provided remotely. The services would not be allowed to be provided at the same time the provider was working another job. Based on some of the times the PAS and waiver services began and ended, another individual may have aided the provider in falsely claiming that PAS and waiver services were performed, as the provider could not have been in two places at once. We questioned 690 hours as potential fraud, totaling $10,906 ($6,273 Federal Share and $4,633 State Share). The total amount paid to the provider for the period tested was $13,847; therefore, we questioned nearly the entire amount paid to the provider for overlapping hours. The table below contains examples of the overlapping hours: See Schedule of Findings and Questioned Costs for chart/table. The following chart summarizes the potential fraud questioned costs by program: See Schedule of Findings and Questioned Costs for chart/table. We also noted other billing issues. In one case, the provider double billed a PAS service on April 30, 2025. The visit form on April 30 had a clock-in time of 3:03 p.m. and a clock-out time of 12:03 a.m. on May 1, 2025. Upon crossing from one day to another, the visit generated two claim forms in the EVV system. The first claim had an end time of 11:59 p.m., and the second claim form had the start time of midnight or 24:00 on the next day. In this case, the provider changed the billable start and end times for both claims and was able to double bill 4.75 hours, resulting in $41 in Federal share questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Overlapping hours were billed on May 25, 2025, between a personal care claim and the independent living claim. There are no additional questioned costs because the overlapping hours for independent living were questioned as potential fraud as they overlapped with the provider’s outside employment. See the table below: See Schedule of Findings and Questioned Costs for chart/table. The Agency has been aware of the provider’s billing issue and continued to allow the provider to bill for services. On June 21, 2025, the Agency established Accounts Receivables for overbilling for PAS and AD Waiver services. The PAS overpayment totaled $17,008, and it included services provided from December 28, 2023, through May 2, 2025. The first PAS service date billed by the provider was December 28, 2023. One recoupment of $68 was applied towards the balance on August 2, 2025, and no other payments have been made. The AD Waiver overpayment totaled $4,078 and included weeks billed from March 17, 2024, through March 20, 2025, prior to the services we reviewed. As of October 20, 2025, $781 has been recouped from payments made to the provider, leaving a balance due of $3,297. The overpayments for both programs did not account for the potentially fraudulent payments made due to the provider having outside employment. Finally, we noted the provider and her husband were foster parents to an Agency ward during the period reviewed beginning on June 7, 2025. The PAS and personal care clients were also residing in the home. Per narratives, the personal assistance client, the provider’s daughter, was renting a room from the provider for $200 per month for rent and utilities. The personal care client was also a relative of the provider and was on the sex offender registry. Per the sex offender registry, he was convicted of felony sex trafficking of children in 2014. The provider’s address listed on the sex offender registry was the same as that for the personal care client. This address was first reported on September 20, 2024, and was last verified as of July 10, 2025. According to the case file, the personal care client first moved to the provider’s residence on February 11, 2025, and he lived in his mother-in-law’s cabin in the provider’s backyard with no separate entrance, utilities, or address. The Agency was told the client had his own kitchenette, bathroom, and living area. He paid $400 per month for rent and utilities. The following is a picture of the cabin in which the client was residing: See Schedule of Findings and Questioned Costs for chart/table. The provider and her husband completed a home study through APEX Foster Care (APEX) on June 16, 2025, in order to be foster parents to a 14 year old girl. The home study did not disclose the personal care client as residing at the residence. The home study also noted that the PAS client was sleeping on the couch in order for the foster youth to have a room in which to sleep. Additionally, the home study noted that there were no outbuildings. The foster care regulations require the applicant and household members 18 years of age and older to submit background checks prior to licensing. Since the personal care client was not disclosed as a household member, he did not have a background check completed. On July 9, 2025, APEX sent a “Closure of Support Letter” to the provider, stating they would no longer be supporting the foster home effective July 23, 2025. The letter noted the provider’s husband did not disclose an assault and battery charge from June 26, 2024, and there were concerns about the accuracy and honesty of reported household information. The new agency supporting the foster family, Saint Francis Ministries, completed a home study on August 29, 2025. Again, the home study did not disclose the personal care client as residing at the residence. The home study noted that the PAS client now lived in Hastings, Nebraska. The home study also noted that there was a shed in the backyard where they kept their lawn equipment and four-wheeler. The shed is kept locked, and only the provider and her husband have a key. Based on this information, the personal care client must live in the home. The provider’s husband disclosed the assault charge from 2024 where he broke a man’s jaw in a fight after a hit and run incident. He was found guilty of misdemeanor assault and battery on June 26, 2024. Although a misdemeanor assault conviction does not prevent a prospective foster parent from being eligible to provide care, the Agency has the discretion to review convictions to determine eligibility. The background check also noted four Driving Under the Influence convictions prior to August 2013, two resisting arrest misdemeanor convictions, and three possession of marijuana convictions prior to September 22, 2005. Not only was there a safety risk for having a registered sex offender living with the foster youth, but also the provider appeared to be purposefully deceitful in failing to disclose this information to the foster care agencies, knowing that doing so would result in the placement being denied. Once the Agency was aware of the situation, the foster youth was removed from the home on October 6, 2025. The provider and personal care client were also deceitful when they obtained services through the AD Waiver as well. The personal care client did not live in a cabin in the backyard with a separate kitchen, living area, and bathroom, but cleaning of these areas was authorized for the provider even though the living area, kitchen, and bathroom would have been shared with the provider’s other family members, and these services should not have been authorized. Provider #2 The provider was authorized 39.25 hours of service per week for one client and 26.75 hours of service per week for a second client. For the initial week tested of January 12, 2025, through January 18, 2025, the provider billed 40.5 hours and 27 hours of service, respectively. Additionally, none of the visits were completed through a device using GPS to track the location of the service, and no signatures were obtained from the clients. We also noted that the provider was employed with a public school as a student bus driver. We obtained the provider’s employment records and compared the PAS billings to the employment records for a three-month period from October 28, 2024, through January 31, 2025. The provider generally worked for the other employer between 6:00 a.m. to 5:30 p.m., Monday through Friday, which conflicted with hours being billed for personal assistance services. We identified 28 days during which PAS hours billed overlapped with times that the provider was working for the other employer. We questioned as potential fraud any PAS hours billed that overlapped with the provider’s employment hours. In determining these overlapped hours, we did not factor in any travel time that may have occurred between the client’s homes and the provider’s place of employment; therefore, the possibility exists of additional fraudulent payments. We questioned 142.5 hours as potential fraud, totaling $2,138 (Federal share $1,230 and State share $908). The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. The PAS claims for the additional weeks tested also did not use GPS to track the location; therefore, any hours that were not questioned due to potential fraud were questioned for not complying with the GPS location verification requirement. Federal questioned costs for not complying with the GPS requirements totaled $837. On February 19, 2025, the Agency implemented system enhancements to the EVV system, including the required use of GPS or Interactive Voice Response (IVR) verification. The last large payment issued to the provider was on July 25, 2025, for service dates from February 1, 2025, through February 19, 2025. From July 26, 2025, through October 28, 2025, the provider has received only $338 in payments. It appears the EVV system enhancement may have prevented the provider from manually entering times into the EVV system for PAS services while performing outside employment. Providers #3 – #5 Provider #3 was an individual who provided services to 3 clients. Provider #4 was an individual who provided services to 2 clients, and Provider #5 was an agency that provided services to 10 clients during the period we reviewed. For each provider, we noted that the hours billed did not follow the SNA. For example, the SNA included tasks that were to be provided every day of the week, but the provider provided the services less than seven days a week. Another example is that the provider would bill for services multiple times a week when the service was authorized only once per week. Additionally, Provider #5 billed for hours that exceeded the service authorizations. See the table below for a summary of the hours overbilled: See Schedule of Findings and Questioned Costs for chart/table. Additionally, we noted the following issues for Provider #3: • The provider was authorized 39.75 hours per week for one client, 40 hours per week for another, and 38.25 hours per week for the third client, for a total of 118 hours. It is not reasonable to authorize 118 hours of service to be performed in a week. This would require the provider to perform services for more than 16 hours every day of the week. • We also noted that two of the clients that Provider #3 served were the parents of the provider. These clients did not live with the provider; however, the provider stated that the start and end address for these two clients was that of the provider. Both of these clients were authorized services for cleaning the bathroom, kitchen, bedroom, and living room at the client’s home. Services were not allowed and would not be reasonable at the provider’s home. Per the Agency, “Since the two clients do not live with the provider none of the visits should have been scheduled nor can services be performed at the provider’s address.” All services billed for these two clients were questioned. It should be noted that we reviewed only one week, and there may be additional claims billed for services at the provider’s home that would not be allowed. Federal share questioned costs were $656. Random Sample Testing We selected five PAS payments randomly for testing. We noted issues with all five PAS claims tested. The Federal payment errors for PAS claims totaled $78 for the sample. The total sample tested was $884, and the total population for the Federal share of PAS claims for the fiscal year totaled $6,212,765. Based on the sample tested, the dollar error rate for the sample was 8.82% ($78/$884), which estimates the potential dollars at risk for fiscal year 2025 to be $547,966 (dollar error rate multiplied by the population). For three of the five providers, the hours billed by the provider exceeded the SNA. Additionally, for four of the five providers, the provider did not follow the SNA when billing for tasks provided. For example, the SNA included tasks that were to be provided every day of the week, but the provider performed the services fewer than seven days a week. Another example is that the provider would bill for services multiple times a week when the service was authorized for only once per week. See the table below for a summary of the hours overbilled: See Schedule of Findings and Questioned Costs for chart/table. Additionally, for Provider #7 we noted that there were three visits during the week tested that were not completed through a device using GPS. Two of these visits were services claimed from 5:15 a.m. to 6:15 a.m., and the third was from 7:30 p.m. to 8:35 p.m. The provider stated that GPS was not used due to a scheduling error and forgetting to clock in or clock out. The three non-GPS utilized visits exceeded the Agency’s 10% allowance at the time of service for non-use of GPS. Additionally, we noted that the provider changed the service end date for one visit from 6:48 p.m. to 7:48 p.m., which appears unreasonable. Cause: Procedures were not adequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with recipient needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Nebraska Department of Health and Human Services (DHHS) appreciates the work of the auditor’s office and the opportunity to respond to this early management letter. DHHS agrees with the recommendations articulated in the early management letter.

Program: AL 93.778 – Grants to States for Medicaid – Allowability & Eligibility Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2024), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. 477 NAC 3-007 states, in part, “A redetermination of eligibility for continued Medicaid benefits must be completed every 12 months.” 477 NAC 3-007.01, states the following: A renewal of modified adjusted gross income (MAGI)-based eligibility shall be completed on the basis of information available to the Department without requiring information from the individual. Information will only be required from the individual when not available through other sources. If information is not available to complete a renewal, a prepopulated renewal form shall be sent by the Department to the applicant or authorized representative. The completed renewal form and necessary verifications shall be returned within 30 days of the date the renewal form was sent. 477 NAC 9-002 requires the Agency to provide the applicant or client a 10-day notice prior to an adverse action against the applicant or client. 477 NAC 16-001.02 states “Current monthly household income and family size shall be used for individuals who have been determined financially eligible for Medicaid.” 477 NAC 15-005 states that the household for an individual who is under 19 years old includes the individual’s natural, adopted, and stepparents if the parent is living in the household. Good internal control requires policies and procedures to ensure that recipients meet eligibility requirements, and reviews are completed in accordance with State and Federal regulations. Condition: The Agency’s procedures were inadequate to ensure managed care payments were allowable, and recipients were eligible. Repeat Finding: 2024-058 Questioned Costs: $5,358 known ($592, 2405NE5MAP; $4,766, 2505NE5MAP) Statistical Sample: No Context: We tested 40 managed care payments and noted the following issues: • For one client, the household income reported was $0. Per the Agency’s case management system, the client’s father was living in the household; however, the Agency inappropriately did not include the father in the client’s budget when determining eligibility. Since the Agency did not include the father in the budget, the Agency did not verify whether the father had income or not. As a result, we questioned $530 for the payment tested and additional questioned costs of $4,236 for payments made for October 2024 to June 2025. • For four clients tested, the Agency did not redetermine eligibility in a timely manner. For one of these clients, this resulted in the client remaining on Medicaid after the client was no longer eligible. The renewal for this client was due on December 31, 2023. A renewal form was mailed to the client on December 26, 2023, and was due on January 25, 2024. The renewal form was not received by the Agency, so the case should have been closed in February 2024 after a 10-day notice was provided to the client. The case was not closed until July 13, 2024, resulting in managed care payments being made from March 2024 to July 2024. We questioned costs of $592 for the July 2024 payment tested. Federal payment errors for the sample tested were $1,122. The total sample tested was $17,952, and the total Federal Managed Care expenditures during the fiscal year were $1,611,236,276. Based on the sample tested, the dollar error rate for the sample was 6.25% ($1,122/$17,952), which estimates the potential dollars at risk for fiscal year 2025 to be $100,702,267 (dollar error rate multiplied by the population). Out-of-sample questioned costs total $4,236. Cause: Worker error and inadequate review. Effect: An inadequate review of recipient eligibility increases the risk of benefits paid not being in accordance with State and Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure recipients are eligible, and payments are proper. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2024), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per the Application for a § 1915(c) Home and Community-Based Services Waiver, effective March 1, 2022: • “The Community Integration provider is primarily in the community, providing a combination of habilitation, supports, protective oversight, and supervision to bill in hourly units.” • “Day Supports is a habilitative service offering habilitative activities in a provider-owned or controlled nonresidential setting when not delivered virtually.” • “Supported Family Living cannot exceed a weekly amount of 70 hours.” A good internal control plan requires procedures to ensure that services provided agree to the individual support plan and service authorization. Condition: We tested 15 claims paid from the Comprehensive Developmental Disability (CDD) Waiver and noted three payments tested did not have adequate documentation. Repeat Finding: No Questioned Costs: $887 known ($644, 2405NE5MAP; $243, 2505NE5MAP) Statistical Sample: No Context: For three claims tested, adequate supporting documentation was not on file, as detailed below: • For one claim, the provider billed 33 hours for Community Integration Services. Upon review of the documentation on file, only 30 hours should have been billed. Additionally, of those 30 hours, 24.5 should have been billed as Day Support and 5.5 hours as Community Integration. As a result, we questioned $243 on the claim tested. • During review of another claim, we noted that two providers were approved to provide Support Family Living services for one client for a total of 300 hours during September 2024. However, the providers billed for 330.75 hours during the month, exceeding the authorization by 30.75 hours. Additionally, the providers billed for more than the allowed 70 hours a week for three different weeks during September 2024. Hours for these three weeks ranged from 79.75 to 84.5 hours. Lastly, one of the providers billed for 0.25 hours of Community Integration at the same time as Supported Family Living. As a result, we questioned $562, which is out-of-sample. • During review of one claim, we noted that the provider billed for 0.75 hours of Community Integration and for Supported Family Living at the same time. Additionally, the provider billed for the same day twice. As a result, we questioned $82, which is out-of-sample. Federal payment errors noted in the sample were $243. The Federal sample tested was $10,919, and the total Federal CDD expenditures during the fiscal year were $271,944,685. Based on the sample tested, the dollar error rate for the sample was 2.23% ($243/$10,919), which estimates the potential dollars at risk for fiscal year 2025 to be $6,064,366 (dollar error rate multiplied by the population). Out-of-sample questioned costs totaled $644. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of CDD claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability & Eligibility Grant Number & Year: 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.302(a) (October 1, 2024), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. 477 NAC 22-005.03(b) states the following, in relevant part, “The amount paid for private health insurance premiums is deducted from countable income in determining eligibility. . . . This disregard does not apply to individuals eligible as medically needy. For medically needy individuals, the amount of health insurance premiums is deducted from any share of cost due.” A good internal control plan requires procedures to ensure that income is updated for changes timely and adequately, and such updates are documented and verified. Condition: The Agency did not adequately verify the deductions of individuals residing in long-term care facilities to ensure that limits were not exceeded, and the individuals were eligible. Repeat Finding: No Questioned Costs: $47 known Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: • For two recipients, the wrong medical deduction amount was used, causing the share of cost to be understated. o For one recipient, the budget included premiums for dental and vision insurance of $47 and $16, respectively. However, the documentation on file did not support the amounts used. Per the documentation on file, the dental insurance premium should have been $46, and no documentation was on file for the vision insurance premium. This resulted in questioned costs of $10 for the payment tested. o For the other recipient, the budget included a health insurance premium of $378. However, the documentation on file supported an amount of $327. This resulted in questioned costs of $37 for the payment tested. Federal payment errors noted in the sample were $47. The Federal sample tested was $81,558, and the total Federal long-term care facility expenditures during the fiscal year were $311,735,268. Based on the sample tested, the dollar error rate for the sample was 0.06% ($47/$81,558), which estimates the potential dollars at risk for fiscal year 2025 to be $187,041 (dollar error rate multiplied by the population). Cause: Worker error and inadequate review. Effect: If income, including deductions, are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all income and deductions identified are verified and adequately documented. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to State for Medicaid – Allowability Grant Number & Year: 2405NE5MAP, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 45 CFR § 75.303 (October 1, 2024) states, in part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Good internal control requires procedures to ensure journal entries are proper and coded correctly. Condition: The Agency did not have adequate procedures to ensure the journal entry tested was proper and coded correctly. Repeat Finding: No Questioned Costs: $1,597,253 known Statistical Sample: No Context: We tested a journal entry to adjust the Federal Medical Assistance Percentages (FMAP) rates for managed care payments made during the period October 1, 2022, to December 31, 2022. When the Agency prepared the journal entry, it used calendar year 2023 managed care rates to calculate the adjustment. However, since the managed care payments were during calendar year 2022, the Agency should have used the calendar year 2022 managed care rates to calculate the adjustment. This resulted in $1,597,253 being overcharged to the Medicaid grant. Cause: The Agency used the incorrect rates when calculating the adjustment. Effect: When adequate procedures are not in place to ensure journal entries are coded correctly, there is an increased risk for errors to occur. Recommendation: We recommend the Agency improve procedures to ensure journal entries are prepared and coded properly. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability & Eligibility Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Good internal controls require procedures to ensure the following: 1) all payments are proper and allowable, which necessarily precludes disbursements to MCOs for deceased individuals; 2) when identified, errors and overpayments are corrected and, as necessary, recouped in a timely manner; and 3) records are updated promptly to include accurate dates of death. Such procedures could include also setting up effective interfaces with systems containing accurate dates of death or other information used to determine eligibility end dates. Condition: The Agency’s procedures did not prevent payments made for deceased individuals and did not identify the unreasonable payments in a timely manner. Repeat Finding: No Questioned Costs: $32,545 known ($493, 2405NE5MAP; $32,052, 2505NE5MAP) Statistical Sample: No Context: We obtained a listing of all Medicaid capitation payments, with the corresponding Medicaid recipient details, made to Managed Care Organizations (MCOs) in March 2025. We then compared the claims paid in March 2025 to the Vital Statistics records, including death information, maintained by the Office of Vital Records to determine whether any MCOs were receiving capitation payments for deceased individuals. Based on our analysis, we identified that the Agency made capitation payments to the MCOs for 13 deceased individuals in March 2025. For these 13 deceased individuals, we then determined whether additional payments were made after their dates of death. Based on that review, we identified $65,554 in overpayments from both State and Federal funds. In State fiscal year 2025, $32,545 was spent from Federal funds, which are considered questioned costs for State fiscal year 2025. See Schedule of Findings and Questioned Costs for chart/table. Cause: The eligibility system did not receive an automated notice from Vital Records regarding the recipients’ deaths. Identification and verification of recipients’ deaths by staff were untimely. Medicaid eligibility end dates were established after the recipients’ dates of deaths. Effect: Without adequate procedures to identify and prevent payments for deceased individuals, there is an increased risk for fraud or misuse of funds. Recommendation: We recommend the Agency strengthen its procedures to ensure the following: 1) all payments are proper and allowable, which necessarily precludes disbursements to MCOs for deceased individuals; 2) errors or overpayments are corrected and, as necessary, recouped in a timely manner; and 3) records are updated promptly to include accurate dates of death. Such procedures could include also setting up effective interfaces with systems containing accurate dates of death or other information used to determine eligibility end dates. Management Response: The Agency partially agrees. The Agency agrees with the cases identified. However, the Agency has had processes in place that have largely been effective to identify, take eligibility action, and recoup payments made after the date of death for Medicaid recipients, this review highlights opportunities to strengthen established controls.

Program: AL 93.778 – Grants to States for Medicaid – Special Tests and Provisions Grant Number & Year: All open, including 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 447.253(b)(1)(i) (October 1, 2024) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR § 447.253(g) (October 1, 2024), “The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.” The Nebraska Medicaid State Plan, Attachment 4.19-D (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medicaid. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. American Institute of Certified Public Accountants (AICPA) Professional Standards AU-C Section 520.07 states: If analytical procedures performed in accordance with this section identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor should investigate such differences by a. inquiring of management and obtaining appropriate audit evidence relevant to management’s responses and b. performing other audit procedures as necessary in the circumstances. A good internal control plan requires desk audits to include a testing sample of expenses to supporting documentation. Condition: Desk audit procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2024-054 Questioned Costs: Unknown Statistical Sample: No Context: The APA selected 20 of 192 facilities to review desk audits of the fiscal year 2024 cost reports. One State-owned facility did not have a desk audit performed, and 9 of the 19 desk audits tested did not have adequate support to verify large variances. The contractor compared costs from the prior year to the current year and did request verbal explanations; however, appropriate audit evidence was not obtained to verify the explanations. For example: • For one facility, Direct Care Staff and Aides Costs increased by $1,067,965 (31%). The provider explanation was that Staff and Aides increased due to a shift away from using Purchased Services for care staff. However, Purchased Services – Direct Care only decreased $187,461, leaving over $800,000 unexplained. • For another facility, Insurance Costs increased by $82,639 (99%). The facility explained that two separate facilities’ flood insurance policies were split 50/50 in 2023, and they were updated in 2024 to reflect appropriately only one facility. The insurance policies were not obtained to verify the explanation provided. Generally, invoices or other documentation were not obtained to determine if increases or decreases in supplies, services, or direct care costs were accurate. Additionally, looking at variances alone would not support that expenses are accurate and not misstated from year to year. Cause: The contract does not require the accounting firm to obtain underlying support for expenses. Effect: When facilities do not have adequate desk audits performed, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency ensure desk audits provide reasonable assurance that nursing facility cost reports are accurate. Management Response: The Agency partially agrees. The Agency agrees with the recommendation to include the state-owned facility in the desk review process. The Agency disagrees that requiring voucher documentation in every instance of noted material variance is necessary and is considered excessive for the parameters of the desk review. The Agency completes both desk reviews and field audit examinations. The desk review process is not designed to examine every invoice but rather to inspect variances for both increases and decreases and obtain supporting documentation for various inquiries, when warranted. If the explanation from facilities is adequately explained, no documentation is deemed necessary. If there is reason to believe that the information is not accurate, the Agency can either make an adjustment or flag facility as a high risk and include the facility for a more comprehensive review with a field audit examination. When facilities are selected for field audit examinations, additional scrutiny is applied, resulting in additional procedures – particularly documentation review. APA Response: Obtaining only verbal explanations to support significant variances is inadequate to ensure that errors did not occur. Additionally, in the first example noted above, the explanation provided addressed less than 20% of the variance, leaving more than 80% with no explanation.

Program: AL 93.778 – Grants to States for Medicaid; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2505NE5MAP, FFY 2025; 2505NE5021, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2024), the State Medicaid Agency must require the disclosing entity to provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2024): Managing employee means – (1) A general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency[.] Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under §455.101, their information is required to be disclosed. Further, MPEC Section 1.4.1C states the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2024), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303(a) (October 1, 2024) requires the Agency to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-055 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted two providers failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The enrollment system was updated on July 1, 2024, which now requires that an owner (when applicable) and managing employee be reported on the application to move forward with the enrollment. This requirement would apply to providers enrolling or completing the revalidation process after this date. A provider who did not disclose a managing employee enrolled on June 1, 2024, would not complete the revalidation process for five years, so such employer would not be required to update this disclosure until June 1, 2029. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers, as required by Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2505NE5MAP, FFY 2025; 2505NE5021, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR§ 438.3(m) (October 1, 2024): The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards. Amendment One of the contract between the Agency and the MCOs under Section V.P.1.g. states, “The MCO must audit financial reports in accordance with generally accepted accounting principles (GAAP).” A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed in accordance with Federal regulations. Condition: One of three managed care organizations’ (MCO) audited financial reports for the year ended December 31, 2024, was not in accordance with generally accepted accounting principles (GAAP). A similar finding was noted in the prior audit. Repeat Finding: 2024-056 Questioned Costs: Unknown Statistical Sample: No Context: One MCO had an audit performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statement for the MCO was prepared using “accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.” The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners’ (NAIC) manual. Cause: The audited financial reports for one MCO was completed for the Nebraska Department of Insurance, which did not require the financial statements to be in accordance with GAAP. Effect: When the financial audits completed by the MCOs are not presented in accordance with GAAP, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO financial statements to be presented in accordance with GAAP. Management Response: The Agency partially agrees. MCO contracts have been amended to require financial audits on the basis of GAAP (generally accepted accounting principles). The requirement has been reiterated to the MCO who did not do a separate GAAP audit and instead completed the audit in a manner that has been determined sufficient with Medicare and in other state Medicaid programs.

Program: AL 93.778 – Grants to States for Medicaid – Special Tests and Provisions Grant Number & Year: 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 455.1 (October 1, 2024) sets forth requirements for a State fraud detection and investigation program, including having a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency’s Program Integrity (PI) and Special Investigations Units (SIU) perform these functions. Per 42 CFR § 455.14 (October 1, 2024): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. Per 42 CFR § 455.16 (October 1, 2024): A full investigation must continue until— (a) Appropriate legal action is initiated; (b) The case is closed or dropped because of insufficient evidence to support the allegations of fraud or abuse; or (c) The matter is resolved between the agency and the provider or beneficiary. This resolution may include but is not limited to— (1) Sending a warning letter to the provider or beneficiary, giving notice that continuation of the activity in question will result in further action; (2) Suspending or terminating the provider from participation in the Medicaid program; (3) Seeking recovery of payments made to the provider; or (4) Imposing other sanctions provided under the State plan. The Nebraska Medicaid State Plan, Section 4.5 (Medicaid Agency Fraud Detection and Investigation Program), states, “The Medicaid agency has established and will maintain methods, criteria and procedures that meet all requirements of 42 CFR 455.13 through 455.21 and 455.23 for prevention and control of program fraud and abuse.” Under PI’s Policies and Procedures: Full investigations • Each month, investigators will review their cases and use their professional judgment to determine the prioritization of their active cases. The following guidelines will be considered in this review: o The investigation of a provider for termination due to a finding on annual or monthly screening is a HIGH priority o Client health & safety influences the priority of a case o Definitive interpretation of regulations influences the priority of a case o Cases in the preliminary investigation phase are of a moderate priority PI’s Policies and Procedures also include the following under SURS [Surveillance and Utilization Review System] Quarterly Sample Selection & Review Procedures: At the end of each calendar quarter, [a contractor] runs the Advantage Suite SURS reports. . . Effective with the reports received in January 2008, a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports sometime during the calendar quarter of January 1, 2008 – March 31, 2008 and for each quarter thereafter unless notified otherwise. A good internal control plan requires procedures to ensure that cases are not only reviewed and adequately collected on, but also appropriate dispositions are made in a timely manner. Title 42 CFR § 433.320(a) (October 1, 2024) states, in relevant part, the following: (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64). (2) The agency must credit CMS with the Federal share of overpayments subject to recovery on the earlier of— (i) The Form CMS-64 submission due to CMS for the quarter in which the State recovers the overpayment from the provider; or (ii) The Form CMS-64 due to CMS for the quarter in which the 1-year period following discovery, established in accordance with § 433.316, ends. Condition: For one of five SIU cases tested, there was a lack of documentation to support that the case was fully reviewed. For 4 of 20 Program Integrity cases tested, the cases were not worked timely. Two of five overpayments were not reported properly. Additionally, policies and procedures to identify potential cases were not being followed. Repeat Finding: 2024-057 Questioned Costs: Unknown Statistical Sample: No Context: PI is tasked with, among other things, investigating cases of potential provider fraud in the Medicaid Program. Cases received are delegated to investigators who track their activity notes and documentation in one central Investigative Case Management system (ICM). Substantial cases with a large amount of money that may be due back will be referred to the Attorney General’s Medicaid Fraud and Patient Abuse Unit (MFPAU). In cases that are not referred to and accepted by the MFPAU, PI can sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. In the fiscal year ended June 30, 2025, PI opened 372 new cases and worked another 327 cases that had been opened prior to fiscal year 2025. Open cases may include those no longer being investigated, but seeking repayment, and cases that are currently with MFPAU. SIU investigates allegations of suspected recipient fraud. In the fiscal year ended June 30, 2025, SIU opened 76 new cases and worked another 31 cases that had been opened prior to fiscal year 2025. We tested 20 PI cases and 5 SIU cases and noted the following: • One SIU case was opened on September 18, 2024, after an allegation that a Medicaid recipient was working a full-time job and a part-time job, all the while receiving SNAP and Medicaid benefits. Per the investigator’s notes, the case was identified as “not fraud” and closed on October 30, 2024. The recipient in question averaged over $4,000 per month in income during calendar year 2024, while the Medicaid income limit for a single adult was only $1,670 per month; therefore, the recipient was clearly over the income limit. Additionally, per Title 477 NAC 3-004(B)(viii)(2)(a), a “client must report new employment within 10 days of receipt of the first paycheck . . . .” However, the recipient failed to report new employment on at least three occasions during calendar year 2024. After this was brought to the Agency’s attention, the Agency calculated $6,390 in overpayments. • Four PI cases were not worked timely: o One PI case was opened in April 2023 for a caregiver working for a Personal Care provider that was billing more hours through EVV (electronic visit verification) than what was authorized. The investigator on the case pulled the EVV data for the caregiver and noted potential overbilling; however, the investigator soon left the Agency, and the case was reassigned in November 2023. From November 2023 through May 2025, monthly notes were added to the case indicating the new investigator needed assistance on the case, but no investigative actions were taken. Additionally, a second referral for the Personal Care provider was received in November 2024, alleging that one of the clients was not receiving the work that was “needed, authorized, and billed,” yet still no investigative action was taken. As of December 2025, at the time of field work, the investigator was still waiting for guidance on how the case should be worked, over 2.5 years after it was opened. The Personal Care provider received $588,135 in Medicaid payments during fiscal year 2025. In addition, the case above was linked to a related case that was noted to have “credible allegation of fraud” and had been referred to the MFPAU in October 2019. The related case appears to have involved the same provider, but under a different name. Payments were suspended to the related provider in August 2022. Coincidentally, the new provider in the case above began submitting claims to the State in September 2022. Both providers have the same physical location and mailing address. Although the connections between the two providers appear obvious, there was no documentation to support that PI had referred the new provider’s case to the MFPAU. o One PI case was opened in December 2022 when PI received a referral from a Developmental Disabilities (DD) Service provider from the MFPAU that another DD Service Provider was double billing Medicaid. PI was requesting and reviewing records from the provider and one of the managed care organizations through September 2024. Then, from October 2024 until July 2025, no investigative actions were taken on the PI case. The case was closed in October 2025 after a review of claims in the State’s DD claim system, and the managed care organization confirmed receipt of overpayment. o One PI case was opened in December 2023 when a managed care organization flagged a provider for potential overbilling and identified an overpayment totaling $15,491. We reported a finding on this same case in the prior year audit, as there was little investigative work done since January 2024. As of November 2025, no work has still been done over 17 months after the case was opened. o One PI case was opened in March 2024, when PI received a referral that a caregiver working for a Personal Care provider was working excessive hours. The investigator ran EVV claim reports in May 2024, October 2024, and February 2025; however, no other significant action appears to have been taken on the case as of November 2025, at the time of field work. The caregiver claimed $163,223 in services provided during fiscal year 2025. We also noted that the provider received a total of $3,263,963 in fiscal year 2025 for the claimed services of all its caregivers combined. Furthermore, we noted that PI was not following current policies and procedures for identifying potential fraud, waste, and abuse. Its policies and procedures indicated it would review the Statewide SURS report quarterly, and “a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports.” This would equate to at least 24 cases a year. Since at least July 2021, the number of cases sampled from the SURS reports has been less than 13 annually, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. The Agency noted during the prior audit that the SURS reporting mechanism was not functioning as designed, and it would be searching for a replacement fraud abuse detection system and would be updating its policies and procedures. However, there were no updates as of field work in October 2025. In addition, we noted that three overpayments tested were not properly reported: • In June 2022, MFPAU notified PI of having reached a settlement with a developmental disabilities service provider for $300,000. PI opened a case in its ICM to track the overpayments. The first payment was received in June 2022, and the second payment was received in October 2022. However, the receipt of the overpayments was not reported on the CMS-64 report as of the quarter ended September 30, 2025. The Agency has not determined the Federal portion of the $300,000; therefore, Federal questioned costs are unknown. • In March 2024, Centers for Medicaid Services (CMS) sent PI a final findings report, which showed unallowable claims of $332,645 for services provided by a medical provider during the period of December 2018 through February 2023. The accompanying letter also directed PI to report on the CMS-64 report the amount of $332,645 ($223,165 Federal portion) in overpayments. However, the overpayments were not reported until the quarter ended September 30, 2025. As the overpayments were identified in March 2024, the Federal share was required to be refunded on the CMS-64 report for the quarter ended March 31, 2025, if not received sooner. The amount was eventually reported on the CMS-64 report for the quarter ended September 30, 2025. • One PI case, opened in January 2017, resulted in the individual being convicted of a Class 4 Felony for “Fraud to obtain assistance $1,500+.” Restitution was ordered on March 8, 2021, for $10,536, including a $5,954 Medicaid overpayment. The Medicaid overpayment was established in the Agency’s case management system on August 2, 2021. Per Federal regulations, the overpayment should be reported on the CMS-64 report no later than one year after the overpayment has been identified, which would be the quarter ending September 30, 2022, report. However, the overpayment has not been reported as of the quarter ended September 30, 2025, report. The Agency has not determined the Federal portion of the overpayment; therefore, Federal questioned costs are unknown. Cause: The Agency did not follow proper procedures, including supervisor reviews, to ensure Medicaid cases were worked properly and timely. The PI unit is understaffed. Clerical errors by staff resulted in overpayments not being reported. Effect: When potential fraud cases are not adequately and timely pursued, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency strengthen procedures to ensure cases are properly and timely reviewed, and appropriate dispositions are made. We further recommend the Agency strengthen procedures to ensure overpayments are accurately reported. Management Response: The Agency agrees.

Program: AL 93.959 – Block Grants for Prevention and Treatment of Substance Abuse – Level of Effort Grant Number & Year: B08TI085820, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure Maintenance of Effort (MOE) requirements are met. 45 CFR § 96.30(a) (October 1, 2024) requires the following: Except where otherwise required by Federal law or regulation, a State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. 45 CFR § 96.134(a) (October 1, 2024) states the following: With respect to the principal agency of a State for carrying out authorized activities, the agency shall for each fiscal year maintain aggregate State expenditures by the principal agency for authorized activities at a level that is not less than the average level of such expenditures maintained by the State for the two year period preceding the fiscal year for which the State is applying for the grant. The Block Grant shall not be used to supplant State funding of alcohol and other drug prevention and treatment programs. 45 CFR § 96.124(c) (October 1, 2024) requires the State to expend the Block Grant on treatment services for pregnant women and women with dependent children no less than an amount equal to the amount expended by the State for fiscal year 1994. “A Primer on Maintenance of Effort Requirements” (2020), issued by the Substance Abuse and Mental Health Services Administration (SAMHSA), states the following, as is relevant: A state MUST provide accurate MOE figures every year. Otherwise, it risks a reduction in its award following the period of noncompliance. * * * * States must use a consistent methodology to calculate spending in base and subsequent years so that the expenditure data reflect the same fund sources from year to year. States must use generally accepted accounting principles. * * * * Examples of state fund sources that can be included in the SABG state MOE calculations are: * * * * Medicaid match funds (the state’s share of covered services in state Medicaid programs; this does not include the federal share of covered services) Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency lacked adequate documentation to support that Maintenance of Effort (MOE) requirements were met. The Summary Schedule of Prior Audit Findings lists the status as complete. A similar finding was noted in the prior audit. Repeat Finding: 2024-059 Questioned Costs: None Statistical Sample: No Context: We tested the State MOE and the MOE for Expenditures for Services to Pregnant Women and Women with Dependent Children (Women’s Set-Aside) for State fiscal year 2024, which was reported on December 2, 2024. The required State MOE was $25,520,679, and the Agency reported $28,532,246 of expenditures. However, per review of supporting detail, we noted only $18,141,434 of MOE expenditures, including $7,206,213 of Medicaid Matching funds as well as $10,935,221 in other State expenditures to prevent and treat substance use disorders. We inquired with the Agency regarding the $10,390,812 variance between the amount it reported and the amount per support. The Agency agreed it should have reported $18,141,434 in MOE expenditures. It noted that $10 million of the variance was due to it improperly including opioid settlement payments in the reported amount. The required Women’s Set-Aside was $753,713, and the Agency reported $918,287. The expenditures reported included $48,757 in Federal Medicaid funds, but Federal Medicaid funds are not an allowable source of funds to include. Cause: Inadequate procedures. Effect: Without adequate procedures, there is an increased risk for errors or unallowable expenditures to be reported. Recommendation: We recommend the Agency ensure that MOE requirements are both met and accurately reported, and only allowable categories of expenditures are utilized. Management Response: The Agency agrees. The incorrect data error was discovered prior to the audit by the Division of Behavioral Health (DBH). DBH is currently working with SAMHSA to correct the issue. DBH has already created and implemented another method to pull fiscal data to double-check the substance abuse expenditures for MOE purposes.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.991 – Preventative Health and Health Services Block Grant – Allowability & Subrecipient Monitoring Grant Number & Year: 2301NERSSS, FFY 2023; NB01TO000039, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2024) requires a pass-through entity to “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2024) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.403(f) (October 1, 2024), states that costs should “[n]ot be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.” 45 CFR § 75.405(a)(1) (October 1, 2024) requires costs to be incurred specifically for the Federal award in order to be considered an allowable cost. 45 CFR § 75.430(i)(1) (October 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities. . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. A proper system of internal controls requires procedures to ensure subrecipients are following subaward terms and Federal regulations, including ensuring costs are adequately supported, reasonable, necessary, allowable, and not included as a cost of any other federally financed program. Condition: We performed an attestation of the Nebraska Department of Health and Human Services’ payments to The Karen Society of Nebraska (KSN) for the period July 1, 2023, through December 31, 2024. KSN was a subrecipient of the Agency. We noted the Agency’s monitoring procedures of the subrecipient were inadequate. A similar finding was noted in the prior audit. Repeat Finding: 2024-043 Questioned Costs: $55,880 known ($35,880, 2301NERSSS; $20,000, NB01TO000039) Statistical Sample: No Context: We performed an attestation examination of the Nebraska Department of Health and Human Services’ payments to KSN for the period July 1, 2023, through December 31, 2024. During the period July 1, 2024, through December 31, 2024, the Agency paid $55,880 to KSN through subawards funded by the following Federal programs: See Schedule of Findings and Questioned Costs for chart/table. We reviewed the payments made with Federal funds and noted numerous issues with Federal questioned costs, totaling $55,880. We noted the following related to payments made with Federal funds: Unallowable Expenditures Unsupported Personnel Costs The subrecipient payments to KSN for the Refugee and Entrant Assistance State/Replacement Designee Administered Programs (Refugee) and Preventive Health and Health Services Block Grant (PHHS) Subawards included reimbursements for personnel costs, totaling $46,656, during the period July 1, 2024, through December 31, 2024. KSN provided timesheets to support these costs, which included dates, start and end times worked, and employees’ names and signatures. KSN also provided pictures of checks written to individuals for the personnel costs and stated that they were contractors and not employees. However, KSN could provide neither contractual agreements nor any other documentation that described the services provided by the individuals, dates or estimates of time required to complete the services, or rates of compensation. In addition, the timesheets provided did not contain detailed information on which of the Subawards the individuals worked on and instead listed only brief descriptions, such as “Health Promotion” or “Meeting.” As a result, we were unable to determine how many hours the individuals worked on each of the Subawards, if any. Additionally, one of the proclaimed contractors, identified on documentation submitted to the Agency for both subawards as the “Coordinator” was also the Executive Director of KSN. The Executive Director received a monthly salary, was an authorized signer on the KSN checking accounts, and performed other regular duties on behalf of KSN. As an employee, the Executive Director was required to keep time records in accordance with 45 CFR § 75.430(i)(1), including records that reflect the total activity for which he was compensated, and supported the distribution of his wages among the activities and Subawards he worked on. However, the time records submitted to the Agency for reimbursement reflected only the hours, dates, and times he worked on a single Subaward. Due to the issues noted above, we questioned all personnel costs paid to KSN by the Agency during the period July 1, 2024, through December 31, 2024. Printing and Cleaning Supplies The Agency reimbursed KSN $4,735 for printing and cleaning supplies during the period July 1, 2024, through December 31, 2024. We questioned all $4,735 of these costs, as the costs were charged to multiple grant awards, incurred at the end of the period of performance, inadequately supported, or did not appear reasonable and necessary. • Costs Charged to Multiple Grant Awards In addition to the PHHS and Refugee Subawards awarded by the Agency to KSN, we noted that Lancaster County (County) paid American Rescue Plan Act (ARPA) grant funds to KSN for the purpose of providing “funding for video equipment, contractual services costs, and administration costs to help with prevention and educational presentations” during the period July 1, 2024, through December 31, 2024. However, we noted several printing supplies that were charged to multiple grant awards, including the PHHS Subaward, Refugee Subaward, and the County ARPA grant award, as shown in the table below. We questioned the entire amount paid to KSN by the Agency, totaling $2,221. See Schedule of Findings and Questioned Costs for chart/table. • Costs Incurred at the End of the Period of Performance We also noted that KSN ordered a printer, printer ink, and a printer carrying case on September 28, 2024, for $413. These costs were reimbursed by the Agency as part of the PHHS Subaward on October 24, 2024. However, the period of performance for the subaward ended on September 30, 2024, only two days after the purchase was ordered. It appears unlikely that this purchase was incurred for the Federal award and, therefore, would be unallowable per 42 CFR § 75.405(a)(1). We questioned the entire $413 purchase. • Inadequately Supported Costs On August 2, 2024, the Agency reimbursed KSN $1,412 for cleaning supplies as part of the Refugee Subaward, which included $461 of supplies ordered on July 10, 2024. However, KSN failed to provide detailed support showing what was purchased for $75 of the total order amount, so we questioned these unsupported costs. • Unreasonable and Unnecessary Costs Further, KSN had three separate office locations in Lincoln, Omaha, and Madison, Nebraska. Cleaning supplies were authorized for reimbursement by the Agency as part of the Refugee Subaward for use at the training sessions held at the locations. However, we noted $1,965 of the reimbursed cleaning supply costs did not appear reasonable based on the number of locations and the number of supplies ordered, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we noted $61 of supplies, shown in the table below, which were reimbursed by the Agency for the Refugee Subaward, appeared to be for personal use, as the purchases were for vehicle cleaning supplies. Further, these vehicle cleaning supplies did not appear reasonable based on the purpose of the Subaward, which was to provide refugee-related services. Therefore, we questioned these reimbursed costs. See Schedule of Findings and Questioned Costs for chart/table. Translation Costs The PHHS Subaward stated that, as part of the award, KSN would translate a total of 12 health information booklets to be distributed in print. At the time of reimbursement, KSN provided lists which showed a total of 46 translations to substantiate the reimbursed costs. These lists included only a description of the translation and the number of words translated. The Agency did not obtain or request support for the costs, including copies of the translated material, before reimbursing KSN a total of $1,684; therefore, we questioned the total amount reimbursed. Additionally, for 2 of the 46 translations, we found discrepancies between the number of words on the translations found online, compared to the number of words KSN was reimbursed for, as shown in the table below. Further, the translation titled “Prepare for a hurricane or tropical storm” did not appear to be a reasonable or necessary cost for refugees living in Nebraska. See Schedule of Findings and Questioned Costs for chart/table. Travel and Training Costs KSN was reimbursed $1,805, from both the Refugee and PHHS Subawards, for travel costs during the period July 1, 2024, through December 31, 2024. Based on the documentation provided, the reimbursed travel costs were often for trips taken to locations other than the three KSN offices, and the purpose of the travel was listed as “Health Promotion.” No other documentation was provided to support that the reimbursed travel costs were reasonable, necessary, or allocable to the Subawards, so we questioned the $1,805 of payments from the Agency. We also noted the travel costs included mileage reimbursements for trips taken by individuals on days when they had no hours recorded on their timesheets to the Subawards. KSN was also reimbursed a total of $1,000 from the Agency as part of the PHHS Subaward for costs associated with training students in five face-to-face classes. The supporting documentation provided for these costs consisted solely of timesheets signed by the trainer. No other documentation, such as sign-in sheets signed by attendees, was offered to verify that any students attended the classes. Therefore, we question the $1,000 included in reimbursement from the Agency. Payments to the Executive Director The Executive Director of KSN worked as the coordinator for both the Refugee and PHHS Subawards and was reimbursed by the Agency for his services during the period July 1, 2023, through December 31, 2024. During this time, he also received a salary of $1,675 per month from KSN. Further, we discovered that the Executive Director of KSN had full-time employment with a private firm during the fiscal year. We obtained timesheets from the firm and compared the hours worked to those reimbursed by the Agency. As a result of this comparison, we noted 1,308 hours worked at the firm, totaling $23,544, were also reimbursed by the Agency. We summarized the overlapping hours below, along with the amounts reimbursed for those hours. See Schedule of Findings and Questioned Costs for chart/table. While we might not expect the Agency to be aware of outside employment of subrecipients, the Agency is required by 45 CFR § 75.302(b)(4) (October 1, 2024) to adequately safeguard all assets and ensure that they are used solely for authorized purposes. The Agency should have required KSN to provide additional documentation to support what services were actually performed by the Executive Director in relation to each Subaward, as required per 45 CFR § 75.430(i)(1). Had this documentation been requested, it is likely the Agency may have noticed the discrepancies in the timesheets and could have denied payments. While the Executive Director acknowledged that KSN’s record keeping could be improved, we consider this beyond the scope of poor record keeping. The timesheets provided to the Agency appear to have been falsified, as the Executive Director could not have been working full-time at a private firm while also performing duties for the Refugee and PHHS Subawards. Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its subrecipient monitoring procedures to ensure that they are adequate and timely performed to ensure both the allowability of costs and adherence to Federal regulations and subaward agreements, including ensuring there is proper coordination between the Agency’s divisions when multiple subawards are awarded to the same subrecipient. We also recommend the Agency review these findings to determine if any sanctions against KSN are warranted, and the repayment of funds is necessary. Management Response: The Agency agrees. DHHS acknowledges the finding related to deficiencies in subrecipient monitoring and documentation oversight identified during the audit period. DHHS agrees that, for the period reviewed, documentation obtained from the subrecipient was insufficient to fully demonstrate allowability, allocability, and reasonableness of certain costs in accordance with federal requirements. Since the period of performance under review, DHHS has taken steps to strengthen subrecipient monitoring practices and improve front-end documentation requirements to ensure that costs are adequately supported prior to reimbursement. These actions are intended to reduce the risk of unsupported or unallowable costs and to improve consistency and compliance across programs.

Program: AL 17.225 – Unemployment Insurance – State – Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2024-061 Questioned Costs: $45,708 known Statistical Sample: No Summary: Audit Finding 2025-011, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total tested was $18,372, and questioned costs for payments tested were $1,320. Total benefit payments for the fiscal year ended June 30, 2025, were $107,466,760. Based on the sample tested, the dollar error rate for the sample was 7.18% ($1,320/$18,372), which estimates the potential dollars at risk for fiscal year 2025 to be $7,716,113 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $44,388. A similar finding was noted in the prior audit. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper Unemployment Insurance (UI) benefits by ensuring compliance with applicable State and Federal requirements. At a minimum, those procedures should ensure the following: 1) proper adjudication actions – including wage crossmatches, investigations into suspect separation from employment information, and separation information requests being sent to employers – are undertaken; and 2) neither ineligible State employees nor other ineligible claimants receive benefit payments. Management Response: As part of our ongoing commitment to the accuracy of benefit payments, the Department will continue to take steps to reduce improper payments. The Department will further refine its processes to minimize errors and acknowledges that continued improvement is necessary in certain areas. NDOL is committed to addressing these issues through ongoing evaluation, monitoring of performance, staff training and refresher instruction, and timely adjustments as needed.

Program: AL 17.225 – Unemployment Insurance – State – Reporting Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR § 2900.4 (January 1, 2024, and January 1, 2025), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. Per 2 CFR § 200.302(a) (January 1, 2024, and January 1, 2025), the State’s financial management systems, including records documenting compliance with Federal statutes, regulations, and terms and conditions of the Federal award, must be sufficient to permit the preparation of required reports and tracing of funds to an adequate level of expenditures to establish that such funds have been used according to Federal statutes, regulations, and the terms and conditions of the Federal award. Per ETA Handbook 401 (5th Edition) (August 16, 2017): The data used in preparing the ETA 2112 must be obtained from the books of the state. A properly completed ETA 2112 will accurately show the net result of all transactions in the three accounts comprising the state unemployment fund as they appear in each state’s records. Good internal control requires adequate procedures to ensure reports are complete and accurate. Condition: During testing of the ETA 2112 reports, we noted the following: • For three reports tested, a reconciliation of the ending balance per the report to the bank statement for each account was not properly completed. • For two reports tested, amounts reported either could not be traced to supporting documentation or used the inaccurate amounts from the supporting documentation provided. Repeat Finding: 2024-062 Questioned Costs: None Statistical Sample: No Context: The ETA 2112 Report is a monthly summary of transactions in a State unemployment fund which consists of the Clearing Account, Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. Agency controls over the ETA 2112 report include completing a reconciliation of the ending balance per the report to the bank statement for each account. For the three months we tested, a reconciliation was completed by the Agency; however, the ending balances per the report did not agree to the reconciled bank account balances. See the table below for a summary of the variances noted. Upon inquiry, it was noted that these variances had been occurring since the April 2024 monthly report. After this issue was brought to the Agency’s attention, the Agency restated all 12 reports for fiscal year 2025. See Schedule of Findings and Questioned Costs for chart/table. In addition to testing the Agency’s reconciliations, we performed detailed testing of two monthly ETA 2112 reports. During this review, the following issues were noted: November 2024 • The beginning benefit account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was overstated by $41. This also resulted in the ending account balance being overstated by the same amount. • The beginning clearing account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was overstated by $1,666. This also resulted in the ending account balance being overstated by the same amount. • The beginning trust account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was understated by $41. This also resulted in the ending account balance being understated by the same amount. The three errors noted were corrected by the Agency with a reissued report on July 17, 2025, after we questioned the Agency about the amounts reported. April 2025 • The beginning benefit account balance agreed to the ending balance from the March 2025 report; however, due to the issues noted above, the beginning balance was overstated by $41. This also resulted in the ending account balance being overstated by the same amount. • Net UI contributions reported in the Clearing account were originally understated by $1,854 due to the Agency improperly adjusting for a correction made by the bank for a check that originally cleared for an incorrect amount. • The beginning clearing account balance agreed to the ending balance from the March 2025 report; however, due to the reconciliation issues noted above and the bank correction issue, the beginning balance was overstated by $5,648. This issue, along with the understatement due to the improper adjustment for the bank correction noted above, then resulted in the ending balance being overstated by $3,794. • The beginning trust account balance agreed to the ending balance from the March 2025 report; however, due to the issues noted above, the beginning balance was understated by $41. This also resulted in the ending account balance being understated by the same amount. The errors noted were corrected by the Agency with a reissued report on July 17, 2025, after we questioned the Agency about the amounts reported. Additionally, for both months tested, it was noted that the Daily Payment Register Summary was used to report the amount of disbursements by program. In prior years, it was noted that the Daily Payment Register Summary does not account for cancellations, which causes certain program disbursements to be overstated, such as UCFE, and Net UI Benefits to be understated. Upon inquiry of the Department, it was noted that this issue still existed during the fiscal year ended June 30, 2025. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of misrepresented amounts being reported for Federal unemployment insurance programs. Recommendation: We recommend the Agency implement procedures to ensure that amounts reported for Federal unemployment programs are accurate. These procedures should include the following: 1) accurate reconciliations between the ending balances on the reports and supporting documentation are completed; 2) duplicate payments for the various programs are accounted for to ensure proper reporting; 3) amounts reported on the 2112 report can be traced to supporting documentation; and 4) amounts reported on the 2112 report are in line with Federal and State guidelines. Management Response: NDOL agrees that the agency should establish and enforce procedures to ensure the accuracy and reliability of amounts reported for Federal unemployment programs. At a minimum, these procedures should include accurate reconciliation, traceability to source documents, and adherence to guidelines.

Program: AL 17.225 – Unemployment Insurance – State – Special Tests and Provisions Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Neb. Rev. Stat. § 48-652 (Supp. 2024) states, in relevant part, the following: (3)(a) Each experience account shall be charged only for benefits based upon wages paid by such employer. No benefits shall be charged to the experience account of any employer if: (i) Such benefits were paid on the basis of a period of employment from which the claimant (A) left work voluntarily without good cause, (B) left work voluntarily due to a nonwork-connected illness or injury, (C) left work voluntarily with good cause to escape abuse as defined in section 42-903 between household members as provided in subdivision (1) of section 48-628.13, (D) left work from which he or she was discharged for misconduct connected with his or her work, (E) left work voluntarily and is entitled to unemployment benefits without disqualification in accordance with subdivision (3), (5), or (11) of section 48-628.13, or (F) was involuntarily separated from employment and such benefits were paid pursuant to section 48-628.17; and (ii) The employer has filed timely notice of the facts on which such exemption is claimed in accordance with rules and regulations adopted and promulgated by the commissioner. * * * * (d) Benefits paid to an eligible individual shall be charged against the account of his or her most recent employers within his or her base period[.] (Emphasis added) Neb. Rev. Stat. § 48-664 (Reissue 2021) provides the following: Any employer, whether or not subject to the Employment Security Law, or any officer or agent of such an employer or any other person who makes a false statement or representation knowing it to be false, or who knowingly fails to disclose a material fact, to prevent or reduce the payment of benefits to any individual entitled thereto, to obtain benefits for an individual not entitled thereto, to avoid becoming or remaining subject to such law, or to avoid or reduce any contribution or other payment required from an employer under sections 48-648 and 48-649 to 48-649.04, or who willfully fails or refuses to make any such contributions or other payment or to furnish any reports required under the Employment Security Law or to produce or permit the inspection or copying of records as required under such law, shall be guilty of a Class III misdemeanor. . . . When an unemployment benefit overpayment occurs, in whole or in part, as the result of a violation of this section by an employer, the amount of the overpayment recovered shall not be credited back to such employer’s experience account. Title 221 NAC Chapter 3-004 provides that employers have 10 days to respond to the Separation Information Request. Title 219 NAC Chapter 15-001 provides the following: Pursuant to Neb. Rev. Stat. §48-631 and §48-607, the Commissioner or the Commissioner’s designee may redetermine a previous monetary or non-monetary determination if (1) there is an error in computation or identity, (2) pertinent wages not previously considered have been newly discovered, or (3) benefits have been allowed or denied or the amount fixed based upon misrepresentations of fact. When deciding if a redetermination should be made, the following definitions shall provide guidelines: A. “Error in computation”. Erroneous information based on omission, misconception, or mathematical error with a resultant consequence of altering claimant eligibility. B. “Error in identity”. The identity of a specific individual or employer as claimed or asserted which does not meet the condition of being the same as described. C. “Newly discovered wages”. Wages for an individual relevant to their eligibility which have not been previously known or incorrectly reported and documented. D. “Misrepresentation of fact”. An indication by words or other conduct by a person(s) to another that, under the circumstances, amounts to an assertion by words or other conduct not in accordance with the facts, and that if accepted leads the mind of the person relying thereon to an understanding other and different from that which actually exists. Misrepresentation can occur either ignorantly or intentionally[.] Good internal controls require procedures to ensure the following: 1) employers are properly charged, or credited, for unemployment benefits; and 2) adjudicators properly establish overpayments according to statutes and regulations. Condition: During our testing, we noted the following issues regarding overpayments: • For five overpayments established, the employers on the claim were not properly charged or relieved of charging for benefits overpaid to claimants. • One overpayment was identified by the Agency’s Benefit Accuracy Measurement (BAM) staff; however, it was not properly applied to the claim. Repeat Finding: 2024-065 Questioned Costs: None Statistical Sample: No Context: The table below outlines the overpayments tested, the amounts of the overpayments, the weeks ended during which the overpayments occurred, the amount each employer was charged for these weeks, and the amounts credited to their accounts after the overpayments were established. In each case, we noted that the amount credited to the employer’s account was not correct based on the amount overpaid and State statute. See Schedule of Findings and Questioned Costs for chart/table. For overpayments #1, #2, #3, and #5, the overpayment amounts should have been credited to the employers’ accounts. However, the credits were not appropriately applied to the employers’ accounts due to both system errors and employee errors when applying the credits. For overpayment #4, the Pool Account should not have been credited because the overpayment was cancelled. However, the Agency still credited the Pool Account. Additionally, we noted the following regarding BAM Investigations. An additional error was found regarding the Agency not properly establishing an overpayment after being discovered by a BAM Investigator. The overpayment was identified by the BAM Investigator on October 21, 2024, due to late wage reporting by an employer, which affected the base period wages used to determine the benefit amount and resulted in a reduction in the maximum benefit amount (MBA) allowable for the claim. However, the overpayment was not properly established in the benefit payment system. When we inquired about the overpayment, the Agency stated that the system should have created an overpayment. The MBA was adjusted from $7,181 to $4,038. The overpayment should have been established at the point the MBA was exhausted. The total overpayment that should have been established was $2,412. Cause: Inconsistency in staff review/adjudication of claim issues. System not properly set up to charge employers correctly. Effect: Without adequate procedures to ensure employers are properly credited for charges against them, there is an increased risk of noncompliance with Federal and State regulations. Without adequate procedures to ensure claimants are properly rewarded benefits, there is an increased risk of noncompliance with Federal and State regulations. Recommendation: We recommend the Agency review procedures for applying credits to employers for overpayments to ensure the system is working properly. Having an employee review the system’s work will help to ensure proper compliance with regulations. We recommend the Agency review procedures for establishing overpayments with employees to ensure proper compliance with regulations. Management Response: The Nebraska Department of Labor agrees with the recommendation. NDOL recognizes the importance of accurate employer charging and the proper application of credits and overpayments to ensure compliance with applicable State and Federal regulations. NDOL is committed to reviewing and strengthening procedures related to employer charging and overpayment establishment to promote effective internal controls.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance Program – Allowability & Eligibility Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Title III, Subtitle B, Section 3201(f)(2), of the American Rescue Plan Act, 2021, Pub. L. No. 117-2 (March 11, 2021) states, in relevant part the following: ELIGIBLE HOUSEHOLD. - The term ‘‘eligible household’’ means a household of 1 or more individuals who are obligated to pay rent on a residential dwelling and with respect to which the eligible grantee involved determines that— * * * * (C) the household is a low-income family (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)). Low-income family is defined in 42 U.S.C § 1437a(b)(2)(A) as follows: [F]amilies whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families . . . . Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Question 4 of the Frequently Asked Questions (FAQ) guidance document (Revised December 4, 2024), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states, in relevant part, the following: If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. Question 7 of the FAQ guidance document states that other expenses that can be paid for include “reasonable accrued late fees.” Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. 2 CFR § 200.511 (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same regulation states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Documentation to support the eligibility and the amount paid for 5 of 40 payments/households tested was not adequate. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-067 Questioned Costs: $1,580 known Statistical Sample: No Context: We tested 40 assistance payments. We noted the following: • For one payment, adequate income verification was not performed. The applicant attested that the household did not have income. Subsequent payments were made for rent over three months after the attestation. The Agency neither reassessed the household’s income nor obtained a new self-attestation, as required per the FAQ. This resulted in questioned costs of $1,277. • For four payments, the payment amount was incorrect. o For three payments, we did not agree with the amount paid for late fees. For rent paid for future months, it was the Agency’s policy to pay the late fee if the payment was approved after the 15th of the previous month. For example, if the Agency approved a rental payment for the month of October 2024 on September 16, 2024, the Agency would also pay a late fee for October 2024. However, per review of the actual date paid, the late fees paid were either excessive or should not have been paid at all. In total, we questioned $146 in excessive late fees. o For one payment, the Agency calculated a payment amount of $1,342; however, after reviewing the lease, we calculated an amount of $1,185, a difference of $157. Federal payment errors for the sample tested were $1,580. The total sample tested was $64,938, and assistance payments for the year totaled $18,220,684. Based on the sample tested, the dollar error rate for the sample was 2.43% ($1,580/$64,938), which estimated the potential dollars at risk for fiscal year 2025 to be $442,763 (dollar error rate multiplied by the population). Cause: Inadequate procedures to ensure that self-attestations of income were obtained every three months. Inadequate procedures to ensure the payment amount was correct, and late fees were reasonable. Effect: Increased risk of loss or misuse of funds and noncompliance with Federal guidelines. Recommendation: We recommend the Agency strengthen policies and procedures to ensure applicants are eligible for assistance, and payment amounts are reasonable and proper. Management Response: Management agrees with the finding presented.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance Program – Reporting Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. The Emergency Rental Assistance Program (ERA2) Reporting Guidance (Revised June 16, 2025) issued by the U.S. Department of the Treasury states, in part, the following: Each ERA2 Recipient must report the cumulative obligations and cumulative expenditures for the Recipient’s Rental Assistance Project between date of receipt of the ERA2 award through the end of the current reporting period. This includes all amounts obligated and expended by the ERA2 Recipient and its subrecipients and contractors, as applicable. * * * * iv. Total Cumulative Dollar Amount of the ERA2 Funds Paid (Expended) for Housing Stability Services in the ERA2 Rental Assistance Project from award date through the end of the reporting period. * * * * v. Total Cumulative Dollar Amount of the ERA2 Funds Obligated for Housing Stability Services in the ERA2 Rental Assistance Project from award date through the end of the reporting period. A good internal control plan requires procedures to ensure that all required information is reported accurately and supported by underlying data. Condition: For two of two quarterly reports tested, expenditures reported as administrative costs were not accurately categorized as housing stability services costs. Repeat Finding: 2024-068 Questioned Costs: None Statistical Sample: No Context: For the quarters ended December 31, 2024, and June 30, 2025, $1,727,607 and $2,371,862 in ERA2 expenditures, respectively, were reported under the category of administrative costs instead of housing stability services costs. We noted during testing that payments made to two vendors, explicitly for housing stability services per their contracts with the Agency, were not properly categorized in data submitted to the U.S. Department of the Treasury. Upon inquiry, the Department confirmed that the amounts were miscategorized. Cause: Inadequate procedures to compile the reporting data. Effect: Without adequate procedures to ensure reports contain accurate information, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency implement procedures to ensure that figures reported in the ERA2 quarterly compliance report are accurately categorized. Management Response: We agree with the finding.

Program: Various, including 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Funds; 10.555 – National School Lunch Program – Reporting Grant Number & Year: Various, including SLFRP1965, March 3, 2021, through December 31, 2024; 253NE308N1099, FFY 2025 Federal Grantor Agency: Various, including U.S. Department of the Treasury and U.S. Department of Agriculture Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is presented properly. 2 CFR § 200.510(b) (January 1, 2024, and January 1, 2025) states that the auditee must prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements that includes the total Federal awards expended, the total Federal awards expended for each individual Federal program, and the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2024) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state’s central system. EnterpriseOne is the official accounting system of the State. Condition: Several programs did not have expenditures or the amount provided to subrecipients reported accurately on the SEFA. We notified the Department of Administrative Services (Administrative Services) of the errors, and the SEFA was subsequently adjusted. A similar finding has been noted for several years. Repeat Finding: 2024-030 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted 12 programs for various State agencies needed correction. This included overreporting AL 21.027 by $4,254,865 and underreporting AL 10.555 by $4,757,669. Additionally, a program was originally included on the SEFA for over $16 million that was initially selected as a major program; however, it was determined subsequently that the program should not have been reported on the SEFA. The total expenditures and amounts provided to subrecipients, as both originally reported and per the final SEFA, were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue agency training, review of chart of accounts setup, review of object account usage, and working with State employees to help ensure the SEFA is accurate and complete.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2024) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in the case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) Enumerated eligible uses: responses presumed reasonably proportional. A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (D) Assistance to tourism, travel, hospitality, and other impacted industries for programs, services, or capital expenditures, including support for payroll costs and covered benefits for employees, compensating returning employees, support for operations and maintenance of existing equipment and facilities, and technical assistance[.] 31 CFR § 35.6(c) (July 1, 2024) states the following: Providing premium pay to eligible workers. A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID-19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID-19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker’s residing State’s or county’s average annual wage for all occupations as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID-19 public health emergency (such as a description of the eligible workers’ duties, health, or financial risks faced due to COVID-19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2024) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. H.J. Res 7 (2023) states the following: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That, pursuant to section 202 of the National Emergencies Act (50 U.S.C. 1622), the national emergency declared by the finding of the President on March 13, 2020, in Proclamation 9994 (85 Fed. Reg. 15337) is hereby terminated. Approved April 10, 2023. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designated to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2024), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.303 (January 1, 2024) states, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 2 CFR § 200.403 (January 1, 2024), costs must be necessary and reasonable for the performance of the Federal award. Costs must also be adequately documented. Good internal control and sound business practices require procedures for ensuring that: 1) premium pay is paid to only eligible individuals; 2) expenditures are adequately supported; and 3) all expenditures are for allowable purposes. Condition: The State lacked procedures to ensure that: • Grants issued to beneficiaries for worker retention and incentives were used for such purposes. • Premium pay paid to eligible individuals was for work performed during the COVID-19 public health emergency. Repeat Finding: 2024-069 Questioned Costs: $2,619,690 known Statistical Sample: No Context: We randomly selected 40 payments to test. We also judgmentally selected 12 payments and 7 journal entries to test. We noted the following: Payments to Nursing Facilities & Assisted Living Centers for Employee Retention and Recruitment LB 1014 (2022), section 28, appropriated $12,500,000 from the CSLFRF grant to the Department of Health and Human Services (DHHS) for State fiscal year 2025 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $12,500,000 to Medicaid-certified nursing facilities during State fiscal year 2025. During testing of 40 randomly selected CSLFRF payments, we tested five payments, totaling $452,690, made to Medicaid-certified nursing facilities. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014 (2022). Additionally, during June and July 2024, DHHS obtained signed attestations from all entities that had previously received funds in fiscal years 2023 and 2024, attesting that the entity was aware that funds provided could be used only to enhance employee recruitment and retention and that funds were used for such purpose. These forms applied only to funds already received at the time and did not include language referencing that they would apply to those payments issued in the State fiscal year 2025. DHHS claimed to have performed additional monitoring procedures in response to our finding in fiscal year 2024, which consisted of reviewing four entities that received funds in fiscal year 2024. The APA noted that this review consisted of only 4 of the 181 entities that received payments in fiscal year 2025, and the review considered only the use of funds disbursed prior to fiscal year 2025. Lastly, the APA noted that the documentation on file for DHHS’ review did not contain any analysis to support that funds were allowed for allowable retention and recruitment. Because no documentation was provided to support that funds were used for allowable employee retention and recruitment programs, we questioned all costs for the five payments tested, totaling $452,690, and noted that all $12,500,000 disbursed are dollars at risk. Premium Pay LB 1412 (2024), section 112, allowed the Governor to reallocate previously appropriated CSLFRF dollars that could not otherwise be obligated by the December 31, 2024, obligation deadline. Under this authority, the Office of the Governor authorized $3,007,058 to be used for premium pay to State employees. In December 2024, May 2025, and June 2025, DHHS posted three journal entries to move payroll costs of $2,167,000 to the CSLFRF grant. During our review of these entries, totaling $2,167,000, we noted that DHHS had determined the allowability of the entry by calculating the total amount of allowable premium pay during the grant period. DHHS had identified premium pay, totaling $10,537,975, paid to employees providing mental health services as part of the Lincoln Regional Center and Norfolk Regional Center Sex Offender Treatment Program for work dates from December 23, 2019, through April 30, 2023, and stated that this was more than the $9,760,287 in premium pay coded to the grant as of June 30, 2025, including the $2,167,000 tested; therefore, the entry was allowable. However, during our review, we noted the following deficiencies in DHHS’ review: • DHHS included $5,054,478 of payroll costs associated with work performed prior to the implementation of any premium pay on November 1, 2021, and after the end of the public health emergency on April 10, 2023, which is not allowable. • DHHS projections did not include any review of employee exemption status or total wages to support that moving payroll costs to the grant was responsive to employees performing essential work. Further, DHHS had no written justification on file to support the responsiveness of premium pay for any employees. We noted 28 employees who were exempt with wages over 150% of the State average. • DHHS did not properly cap the amount of premium pay at $25,000 per person for the life of the grant. Rather, DHHS capped premium pay at $25,000 per employee per each fiscal year during the grant. • Despite attempting to cap premium pay at $13 per hour for all employees, DHHS did not properly calculate the amount of premium pay earned by each employee. Employees were afforded a 20-30% pay increase for premium pay; however, DHHS calculated the premium pay as 20-30% of the new rate (including premium pay) instead of the employees’ original pay rate, resulting in overstatements of 3-7%. • In determining the amount of premium pay, DHHS erroneously included duplicate payroll lines, totaling $709,206, of gross pay. Taking all of the deficiencies into consideration, the APA calculated total allowable premium pay for the grant period to be only $5,001,281, which was $4,759,005 less than the amount of premium pay coded to the grant. The APA observed that, prior to fiscal year 2025, the agency had moved $7,593,287 of payroll costs to the grant. Therefore, all $2,167,000 of these journal entries tested are questioned costs. Cause: Inadequate procedures to ensure: 1) grants to nursing and assisted-living facilities were used for allowable purposes; and 2) premium pay was paid only to individuals who performed work during the COVID-19 public health emergency and at allowable rates. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. Management Response: Department of Health and Human Services Agency disagrees with this finding. The methods utilized to calculate claims over the $25k per person cap and the max $13/hour increase cap were erroneous. DHHS was able to consolidate the entire data set for the appropriation periods between State fiscal year 2022 and State fiscal year 2025 and showed that, based on allowable claims for each period, there was a total of $10,537,974.76 possible to be claimed, and $9,760,286.67 actually claimed. APA Response: As noted above, 31 CFR § 35.3 (July 1, 2024) defines “premium pay” as an additional amount up to $13 per hour that is paid to an eligible worker for all work performed by the eligible worker during the COVID-19 public health emergency and states that it “may not exceed $25,000 in total over the period of performance with respect to any single eligible worker.” Review of DHHS’s analysis of $10,537,974.76 noted that it includes premium pay in excess of the $25,000 per person total limit for the period of performance for 138 individuals, totaling $4,208,829.04.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Subrecipient Monitoring Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.332 (January 1, 2024) states, in relevant part, the following: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. * * * * (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date . . . . * * * * (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement; * * * * (5) A requirement that the subrecipient permit the pass-through entity and auditors to access the subrecipient’s records and financial statements for the pass-through entity to fulfill its monitoring requirements; and (6) Appropriate terms and conditions concerning the closeout of the subaward. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the passthrough entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the passthrough entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward . . . . * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501. 2 CFR § 200.318 (January 1, 2024) states, in relevant part, the following: (a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in §§200.317 through 200.327. * * * * (i) The non-Federal entity 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. 2 CFR § 180.300 (January 1, 2024) requires that the pass-through entity take specific steps to document that subrecipients are not suspended or debarred, as outlined below: When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. 2 CFR § 200.430(i) (January 1, 2024) states the following in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE’s definition of IBS); * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards[.] Good internal controls and sound business practices require policies and procedures to ensure that adequate monitoring is performed to verify that subrecipients are using funds in accordance with all Federal and grant requirements. Condition: The State lacked procedures to ensure that: • Subrecipient use of funds was monitored to ensure compliance with all Federal and grant requirements. • Subrecipients obtained audits required by Federal requirements, and those audits were obtained and reviewed in a timely manner. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The State paid $172,943,444 to subrecipients for 143 subawards during the fiscal year ended June 30, 2025. We selected 17 subrecipients to test. Additionally, we reviewed the single audit tracking procedures for all State agencies acting as pass-through entities. We noted the following: Insufficient Subrecipient Monitoring Procedures For 5 of 17 subawards tested, the APA noted that subrecipient monitoring was insufficient to ensure that the subrecipient complied with all Federal and grant requirements. Additionally, for one of the subawards tested, the APA noted that the pass-through entity did not have documentation on file to support it verified the subrecipient was not suspended or otherwise debarred. Deficiencies noted included the following: • One $86,650,000 subaward tested was issued by the Military Department (Military) to the University of Nebraska Board of Regents (University). During testing, the APA noted that the only monitoring performed by the Military was a review of the University’s single audit for fiscal year ended June 30, 2024. A total of $47,533,117 was paid to the University for the fiscal year ended June 30, 2025. • During our audit, we observed that for two subawards, one issued by the Department of Natural Resources (DNR) and one by the Department of Health and Human Services (DHHS), each valued at $2,000,000 for capital riverfront improvements and the construction of a youth activity center, respectively, significant disbursements were used to cover construction costs. However, neither pass-through entity could provide documentation supporting that subrecipient monitoring performed or planned included adequate procedures to ensure that the subrecipient had followed its written procurement policies, and procurement procedures were adequately documented. These subrecipients were paid $1,362,909 and $841,446, respectively, during the fiscal year ended June 30, 2025. • For one subaward tested, issued by the Department of Correctional Services (Corrections) for $1,505,826 to implement a transitional living and vocational skills program for former inmates, the APA did not observe any documentation supporting that Corrections had verified the subrecipient was not suspended or otherwise debarred from receiving Federal funds. Additionally, the APA noted that the subaward included significant costs for subrecipient payroll and benefit costs. For those salaried employees who had only a portion of their payroll coded to the grant, Corrections relied on budget estimates submitted at the beginning of the subaward to ensure the cost allocation was proper. The APA observed that six salaried employees had payroll costs coded to the grant, ranging from 2% - 98% of their total salaries. During the fiscal year ended June 30, 2025, the total paid to the subrecipient for this subaward was $204,302. • For one subaward issued by DHHS for $4,000,000 to be used towards increasing childcare license capacity, the APA noted that DHHS failed to perform the subrecipient monitoring procedures outlined in their monitoring policy. The monitoring policy for the subaward indicated that 10% of all expenses would be reviewed. DHHS claimed to have reviewed 10% of all reimbursements between July 2023 – April 2024; however, the APA observed $628,610 of reimbursed costs after April 2024, all of which was disbursed in August 2024 for which no review was performed. Additionally, the APA noted DHHS did not obtain appropriate documentation to support $387 of payroll costs coded to the grant. A total of $627,110 was paid to this subrecipient during the fiscal year ended June 30, 2025. Failure to Communicate all Required Subaward Information During our review of subrecipient monitoring, the APA noted that, for 4 of 17 subawards tested, the subaward did not contain all required information or contained erroneous information, as follows: • In two instances of subawards issued by DHHS, the subaward listed the Federal Award Identification Number (FAIN) as SLFRP3145; however, the primary CLSFRF award to the State of Nebraska was SLFRP1965, while the SLFRP3145 award merely passed through the State to various Non-Entitlement Units (NEU’s) in the State that were the primary recipients. • One subaward issued by DNR and one subaward issued by Corrections lacked required information, as noted below. Neither department could provide documentation showing that this information had otherwise been communicated to the subrecipient. See Schedule of Findings and Questioned Costs for chart/table. Single Audit Tracking Procedures During our review of single audit tracking procedures implemented by the State, we noted the following: • DNR and the Department of Labor (DOL) lacked procedures for determining if subrecipients were required to have a single audit or obtain and review such audits. DOL had 10 subrecipients who had received cumulative payments as of June 30, 2025, ranging from $1,000 to $318,669. DNR had 13 subrecipients that received cumulative payments as of June 30, 2025, ranging from $12,557 to $32,256,022. Three of DNR’s subrecipients have received payments over $750,000 as of June 30, 2025. In reviewing the Federal Audit Clearinghouse (FAC), two of these subrecipients had single audits for the subrecipients’ fiscal year 2024, which listed CSLFRF (ALN 21.027) as a major program and reported no findings. • During testing, the APA identified three instances of DHHS failing to obtain and review subrecipient single audits due to errors in that agency’s tracking procedures. The three subrecipients had received $2,209,137 in CSLFRF funds as of June 30, 2025. The APA obtained the fiscal year 2024 single audits for all three subrecipients from the FAC and noted that ALN 21.027 was listed as a major program on all three audits. None of the audits noted any program-related findings. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements or to ensure that subrecipients obtained single audits when required. Effect: Without adequate monitoring and review procedures, there is an increased risk of Federal awards being used for unallowable costs. Recommendation: We recommend the State strengthen procedures to ensure that subrecipient monitoring is designed properly to ensure compliance with all Federal and grant requirements. We also recommend the State strengthen procedures to ensure that subrecipient single audit requirements are tracked properly, and all single audits are reviewed in a timely manner. Management Response: Military Department The Department of Military disagrees with this finding. The subrecipient submitted an independent audit on 4/1/2025. The independent auditor employed auditing standards generally accepted in the United States (GAAS). Major federal programs included COVID-19, Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027. The independent auditor concluded there were no significant deficiencies or material weaknesses. The auditee was deemed “low risk.” In NEMA’s risk evaluation, it considers two separate University of Nebraska offices whose responsibility includes work to monitor and ensure compliance with Federal regulations. When determining risk appetite and risk tolerance, the “…cost of internal control should never exceed anticipated benefits. Thus, an entity must accept a certain level of risk.” Findings by the independent auditor and Auditor of Public Accounts exceed any benefit that might have been gained by additional subrecipient monitoring. In October 2025, the Agency formally adopted the Subrecipient Monitoring policy and procedure it has informally used the last several years. APA Response: 2 CFR § 200.332(d)(4) (January 1, 2024) requires pass-through entities to perform subrecipient monitoring, which includes obtaining and reviewing subrecipient Single Audit reports. Subsection (d)(4) of this regulation states: If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient’s cognizant audit agency or cognizant oversight agency to perform audit follow-up . . . . Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. Department of Natural Resources While DNR conducted general subrecipient monitoring activities, documentation did not sufficiently demonstrate that monitoring procedures included a review of subrecipient procurement practices for compliance. DNR communicated the required federal award information to the subrecipient through other means, it was not consistently incorporated into the formal subaward agreement as required. While DNR does require Single Audits per their contracts, they did not have formalized, written procedures to consistently determine whether subrecipients met the Single Audit threshold, to ensure timely receipt and review of Single Audit reports when required. The Department acknowledges that documented procedures are necessary to ensure compliance with applicable federal regulations and to strengthen subrecipient oversight. Department of Health and Human Services Agency agrees with finding. Department of Correctional Services Management agrees with the finding.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.3 (July 1, 2024) defines “obligation” to include the following: [A]n order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. 31 CFR § 35.6(b)(4) (July 1, 2024) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions[.] 2 CFR § 200.511(b) (January 1, 2024) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency’s or pass-through entity’s management decision, the summary schedule must provide an explanation. Good internal control and sound business practices require policies and procedures to ensure that all CSLFRF reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million and that written justification is submitted to the Treasury, as required, for projects with expected capital expenditures of $10 million or more. Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations and expenditures were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was submitted accurately or on file for projects with expected capital expenditures. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2024-070 Questioned Costs: None Statistical Sample: No Context: We tested the quarters ended December 31, 2024, and June 30, 2025, Project and Expenditure Reports. We selected 11 of 106 projects from the quarter ended December 31, 2024, report and 11 of 109 projects from the quarter ended June 30, 2025, report to test. We noted the following: Cumulative Expenditures Reported Four of the projects tested did not have cumulative expenditures reported correctly. See Schedule of Findings and Questioned Costs for chart/table. The APA noted that, while the cumulative expenditures for the Hastings Automotive project was overstated by $2,875,500, the Grand Island Welding project was similarly understated by $2,875,500. Cumulative Obligations Reported One of the projects tested did not have cumulative obligations reported correctly. See Schedule of Findings and Questioned Costs for chart/table. The APA noted that, while the cumulative obligations for the Hastings Automotive project was overstated by $2,875,500, the Grand Island Welding project was similarly understated by $2,875,500. Capital Expenditures We noted 10 projects that either did not properly report expected capital expenditures, or a proper required written justification was not on file. • NE Rural Healthcare – The State reported $50,000,000 in expected capital expenditures for this project as of December 31, 2024, which uses CSLFRF funds to build a rural health complex in Kearney, Nebraska. The quarterly report included written justification which identified the harm to be addressed and an explanation for why the capital expenditure is appropriate but did not compare the proposed capital expenditure to at least two alternatives and a demonstration of why the proposed expenditure was superior. The APA noted that documentation on file did support that a comparison had been performed. • PH EMS Equipment – The State reported $0 of expected capital expenditures for the project as of December 31, 2024. However, the project uses CSLFRF funds to purchase equipment for emergency medical services and, therefore, it appears that all $6,539,617 of obligated funds would be considered as expected capital expenditures. The Department of Health and Human Services (DHHS), which is administering the program, did have the required written justification on file for this project. • Long-Term Housing Security – Affordable Housing – the State reported the project as having $750,000 of expected capital expenditures as of June 30, 2025. However, the Department of Economic Development (DED), which is the State agency responsible for administering the project, informed the APA that all $36,467,838 of funds obligated for the project are expected to be used for capital expenditures associated with the development of affordable housing. Therefore, expected capital expenditures were underreported by $35,717,838. Additionally, because the project was erroneously reported as having less than $1 million in expected capital expenditures, written justification was not reported to the Treasury. The APA noted that written justification was on file; however, it did not include a comparison to at least two alternatives or a demonstration of how the proposed expenditure was superior. • PH EMS Ambulance – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that all funds obligated under the project were for purchasing ambulances for rural emergency services. Therefore, all $18,460,383 of funds obligated for the project should be considered expected capital expenditures. Additionally, because the project was erroneously reported as having no expected capital expenditures, written justification was not submitted to the Treasury. The APA noted that written justification was on file and included all required elements. • HVAC – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that the $5,000,000 obligated for the project was to be used for construction costs related to HVAC improvements at a rehabilitation hospital. Therefore, expected capital expenditures should have been reported as $5,000,000. Written justification was on file and appeared to contain all required elements. • Strong Healthy Communities – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that the $10,000,000 obligated for the project was to be used for rehabilitation and adaptive reuse of vacant and abandoned property. Per DED, the State agency responsible for administering the project, all funds obligated were expected to be used for capital expenditures. Therefore, expected capital expenditures should have been reported as $10,000,000. Additionally, because the State erroneously reported the project as having no expected capital expenditure, written justification was not included in the report to the Treasury. The APA noted that written justification was on file; however, it did not include a comparison to at least two alternatives or a demonstration of how the proposed expenditure was superior. • Hastings Automotive – The State reported the project as having $4,700,000 of expected capital expenditures. However, this did not take into consideration that in quarter ended March 31, 2025, an award amendment was issued that transferred $2,875,500 from the Hastings Automotive project to the Grand Island Welding Center project. Therefore, expected capital expenditures were overreported for the Hastings Automotive project and underreported for the Grand Island Welding Center project. For the projects below, the APA noted that written justification was on file but did not include a comparison to at least two alternatives or demonstrate why the proposed expenditure was superior. See Schedule of Findings and Questioned Costs for chart/table. Lastly, during testing of allowability, the APA identified two additional projects that did not have written justification on file, as follows: • NIFA – The State reported the project as having $20,500,000 in expected capital expenditures. The APA observed that the written justification submitted to the Treasury did not include a comparison to at least two alternative expenditures or a demonstration of why the proposed expenditure was superior. DHHS was unable to provide any additional documentation supporting that such a comparison had been completed. • City of Norfolk Water Projects – The State reported the project as having $2,000,000 of expected capital expenditures. However, the Department of Natural Resources could not provide any documentation to support that a written justification was completed. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report, and DAS did not perform adequate procedures to verify the information reported. Not all information reported by the agencies was accurate, and the agencies had a poor understanding of written justification requirements. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file or submitted to the Treasury, as required. Management Response: Agency agrees with finding.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Reporting Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal controls require procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting was not completed for the one subaward issued by the Agency for the Coronavirus Capital Projects Fund program. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: Twenty-nine subawards obligated to 10 subrecipients, totaling $65,921,433, were required to be reported during the fiscal year ended June 30, 2025. We tested 11 of the subawards (to three subrecipients), and one of those subawards was not reported. The subaward obligated $35,000,000 to one subrecipient in March 2024 for a Multi-Purpose Community Facility Project. This award was required to be reported in the FFATA Subaward Reporting System (FSRS) by April 30, 2024. Upon inquiry, it was noted that the Agency was unaware that FFATA reporting was required for this program and, as such, had not completed the required reporting. After our inquiry, the Agency attempted to complete the reporting; however, as of November 3, 2025, the award still had not been reported. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that all required reporting was completed. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely. Recommendation: We recommend the Agency improve its procedures to ensure all subawards are properly reported as required. Management Response: DED acknowledges that it failed to complete the Federal Funding Accountability and Transparency Act (FFATA) for the subaward that DED issued for the Coronavirus Capital Projects Fund program.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Subrecipient Monitoring Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.201(b)(1) (January 1, 2024) states the following, in relevant part: The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. The U.S. Department of the Treasury issued the SLFRF and CPF Supplementary Broadband Guidance on May 17, 2023, which states the following, in relevant part: Treasury further clarifies that a subaward that otherwise meets the requirements of 2 CFR 200.201(b) may be considered a fixed amount subaward even if: 1) the recipient uses its discretion to impose a cost-sharing or match requirement on the subrecipient; or 2) the recipient requires ISPs to submit evidence of costs. More specifically, subawards that provide for a maximum payment amount that is calculated based on a reasonable estimate of actual cost (see 2 CFR 200.201(b)(1)) will be considered fixed amount subawards even if the subaward agreement also provides that payments to the ISP subrecipient will be limited to actual costs after review of evidence of costs. Good internal controls require procedures to ensure that fixed amount subawards are based on a reasonable estimate of actual costs. This would include tracing budgeted costs to historical costs for similar projects, unit pricing data, or other documentation. Condition: For all four subrecipients tested, the Agency did not obtain adequate documentation to support that the subrecipients’ fixed amount subawards were based on a reasonable estimate of actual costs. Repeat Finding: 2024-072 Questioned Costs: Unknown Statistical Sample: No Context: The Agency awarded a total of $92,266,720 to 19 subrecipients for 93 separate broadband infrastructure projects. The Agency considered the subawards to be fixed amount subawards. We tested subawards issued to four subrecipients, which totaled $6,121,549. The Agency did not have adequate documentation on file to support that the fixed amount of the subaward was based on a reasonable estimate of actual costs. Documentation on file included a project budget, business plan, technical capability, and a funding breakdown. However, none of the costs included in this documentation was traced to historical costs for similar projects, unit pricing data, or other documentation. The Agency’s procedures include obtaining documentation for all costs actually incurred by the subrecipients when the project is completed. As of June 30, 2025, only 5 of the 93 projects were completed. We tested two subawards for completed projects and noted that the Agency had obtained additional documentation to support the costs incurred by the subrecipient. Total payments to the Agency’s subrecipients during the fiscal year ended June 30, 2025, were $20,289,827. Cause: Inadequate procedures to verify the amount of the subaward was based on a reasonable estimate of actual costs. Effect: Without procedures to ensure the fixed amount of the subaward is based on a reasonable estimate of actual costs, there is an increased risk of disbursed Federal funds exceeding a justifiable amount. Recommendation: We recommend the Agency improve its procedures to include tracing estimated costs of a project to historical costs for similar projects, unit pricing data, or other documentation. Management Response: The Treasury’s May 17, 2023, supplemental guidance that classified these awards as fixed-price awards, even where actual costs are reviewed prior to full reimbursement, was issued after the first application round had already been submitted, reviewed, and cured. Both CPF-1 awards, issued on June 27, 2023, and CPF-2 awards, issued on June 4, 2024, were established well before the initial audit finding dated March 25, 2025. The agency has implemented modified procedures and adopted a corrective action plan, prospective in nature, to strengthen documentation requirements and cost-reasonableness determinations for any potential future awards, rather than to retroactively alter previously issued awards. However, no new CPF awards have been issued since the initial audit finding. We acknowledge that traditional fixed-price awards do not require reconciliation to actual costs and, absent appropriate safeguards, may present a risk of unjust enrichment. That risk has been fully mitigated by the additional requirement capping final reimbursement at actual costs incurred, thereby eliminating any exposure to inflated award amounts or improper financial benefit to subrecipients. Reimbursements to CPF-1 and CPF-2 subrecipients for the remainder of the federal grant period will be strictly for actual costs incurred.