Audit 405017

The Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended, hereafter referred as the “Transparency Act” that are codified in 2 CFR Parts 25 and 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to System for Award Management (SAM.gov). The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, November 2025, requires the Alabama Emergency Management Agency to report applicable first-tier subawards and contracts information as required in the "Transparency Act". We tested seven (7) subrecipients and identified four (4) instances where the Alabama Emergency Management Agency failed to ensure subaward key data elements were reported about first-tier subrecipients and subawards. Additionally, five (5) instances were identified where the Alabama Emergency Management Agency failed to ensure that applicable first-tier subaward information was reported to the System for Award Management no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made. The Alabama Emergency Management Agency did not have procedures in place to identify which recipients were subject to Federal Funding Accountability and Transparency Act. When first tier subawards are not reported as required, timely accurate information is not made publicly available.

The Uniform Guidance, 2 CFR 200.303, requires non-federal entities receiving federal awards (i.e., auditee management) to establish and maintain effective internal controls over the federal award which provide reasonable assurance the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Additionally, 2 CFR 200.501, requires a non-Federal entity that expends $750,000 or more in Federal awards during the non-Federal entity’s fiscal year to have a single or program-specific audit conducted for that year in accordance with the provisions of this part. The Alabama Emergency Management Agency did not obtain and review audit reports for two of the four subrecipients reviewed. The Alabama Emergency Management Agency did not have sufficient internal controls in place to ensure subrecipient audits were conducted, received, and reviewed. Alabama Emergency Management Agency is unable to ensure that subrecipients are taking corrective action on significant developments that negatively affect the subaward as a result of key audit findings.

The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, November 2025, stipulates for a cost to be allowable under federal awards certain general criteria must be met, including costs that are adequately documented and necessary and reasonable for the performance of the federal award. Additionally, the National Guard Military Operations and Maintenance (O&M) Project’s section of the Compliance Supplement specifically states that indirect costs, except fringe benefits, are unallowable. The State of Alabama’s Finance Department charged a monthly indirect cost fee for operational and professional services which were provided to the Alabama Military Department. During our review of expenditures, we noted the Alabama Military Department charged the indirect costs to the National Guard Military Operations and Maintenance (O&M) Projects program. Management was unaware the costs were being added to the National Guard Military Operations and Maintenance (O&M) Projects program and therefore indirect costs totaling $130,024.00 were incorrectly charged to the program.

42 U.S. Code Section 673 sets the age limit and terms upon which adoption assistance payments may be made to parents or relative guardians under the Adoption Assistance program. We reviewed adoption assistance payments under the Adoption Assistance program at the Alabama Department of Human Resources. The Adoption Assistance program primarily relies on system controls within the Family, Adult, and Child Tracking System (FACTS) which is designed to notify staff when eligibility expires and to automatically stop payments based on the actual end date entered by approved designated personnel. Approved monthly subsidy rates are used to calculate adoption assistance payments. During our testing we identified four (4) instances, from 25 adoption assistance cases reviewed, where adoption assistance payments were made on behalf of recipients after their eligibility expired. In these cases, staff were not notified of eligibility expirations and subsidy payments continued beyond the actual expiration date. Program staff used estimated end dates to document subsidy agreement dates in FACTS rather than using actual end dates. Since an improper date was entered into FACTS, the subsidy payments continued beyond the eligibility period. Due to errors made during input of eligibility end dates, FACTS did not generate notifications or stop payments as designed, which resulted in continued adoption assistance overpayments totaling $81,502.04 to ineligible recipients.

45 CFR Sections 75.420 through 75.475 establishes the principles to be applied in establishing the allowability of certain items involved in determining costs charged to federal awards. The Uniform Guidance, 2 CFR 200.303, requires non-Federal entities receiving Federal awards (i.e., auditee management) to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal Award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Expenditure transactions for the Social Services Block Grant program at the Alabama Department of Human Resources consist of payments for multiple services. Client services rendered are entered into the Family, Adult, and Child Tracking System (FACTS) by Resource Management staff based on invoices approved at the county level. Those services are used to determine payment amounts to clients. During the review of twenty-five (25) expenditure transactions, we identified one transaction consisting of seven duplicate service payments totaling $4,900.00. Program staff entered services received by seven eligible clients twice into FACTS. The Alabama Department of Human Resources did not have adequate controls in place to prevent, detect, and correct the error in a timely manner. As a result, unallowable costs were incorrectly charged to the Social Services Block Grant program.

The Uniform Guidance, 2 CFR 200.303, requires non-Federal entities receiving Federal awards (i.e., auditee management) to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal Award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement, November 2025, states that the federal share of state Adoption Assistance Subsidy Payments is the Federal Medical Assistance Program (FMAP) percentage. The FMAP percentage is entered into the Alabama Department of Human Resources’ (DHR) State of Alabama Accounting and Resource System (STAARS), their system of official record, which calculates the federal share of the State’s Adoption Assistance Subsidy Payments. This percentage varies by state and fiscal year. The FMAP percentage in STAARS has not been updated since fiscal year 2022. When verifying compliance with matching requirements, we determined the FMAP percentage in STAARS was incorrect. As a result, DHR 's automated cost allocation calculations resulted in an understatement of the matching requirement. Upon further review, it was determined DHR utilized spreadsheets as their primary tool to calculate matching requirements instead of STAARS for fiscal year 2025. After performing additional audit procedures, it was determined the matching requirement was met. DHR did not have adequate controls in place to ensure the FMAP percentages were updated annually in STAARS which could lead to the required federal share not being met for the Adoption Assistance Program.

The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement dated November 2025, stipulates for a cost to be allowable under federal awards certain general criteria must be met, including that costs are adequately documented and necessary and reasonable for the performance of the federal award. The Alabama Department of Public Health (ADPH) passed through a portion of the Immunization Cooperative Agreement federal award to subrecipients. Based upon procedures performed, four (4) of the 60 expenditures reviewed did not have adequate documentation to support the reimbursements resulting in questioned costs of $82,598.35. We noted that of the four expenditures, two did not provide adequate detailed documentation to support their request for reimbursements and two were related to media usage, college awareness campaigns, and sponsorships, and lacked additional support to verify the allowability of the expenditure in relation to the Immunization program. The documentation which was submitted and approved by ADPH for payment consisted only of summary information and did not contain detailed information to ensure that amounts were necessary and reasonable for the performance of the federal award. The ADPH did not have adequate policies and procedures in place to ensure that all requests for reimbursement were supported by adequate detailed documentation to ensure all costs are allowed under the federal award.

The Uniform Guidance, 2 CFR 200.403, stipulates except where otherwise authorized by statute, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. We tested twenty-five (25) expenditure transactions and identified 17 instances where the Alabama Law Enforcement Agency charged unallowable costs to the Homeland Security Grant program. Costs for another federal program were incorrectly charged to the Homeland Security Grant program resulting in questioned costs of $127,028.15. The Alabama Law Enforcement Agency did not have adequate procedures in place to ensure costs were charged to the correct program. As a result, costs were incorrectly charged to the Homeland Security Grant program.

The Uniform Guidance, 2 CFR Part 200, Appendix XI Compliance Supplement dated November 2025, stipulates a recipient may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. The Alabama Law Enforcement Agency recorded transactions to the Homeland Security Grant program outside of the period of performance. During our review of the 21 transactions recorded after the grant ended, we noted eight (8) were for costs incurred outside the approved period of performance. These transactions resulted in total unallowable costs of $6,308.00. The Alabama Law Enforcement Agency did not have adequate procedures in place to ensure costs were not charged outside the approved period of performance.

The Uniform Guidance, 2 CFR 200.328, requires nonfederal entities to submit financial reports as required by the Federal award. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. We tested four (4) quarterly Federal Financial Reports (SF-425) and identified two (2) instances where the Alabama Law Enforcement Agency (ALEA) did not submit the report within 30 days of the end of the reporting period. ALEA did not have adequate procedures in place to ensure SF-425 quarterly reports were submitted within the required reporting period. As a result, ALEA did not comply with the reporting requirements of the grant which prevented the Federal awarding agency from actively monitoring the program.

The Uniform Guidance, 2 CFR 200.332(e), requires non-Federal entities to monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. During our review of subrecipient monitoring, the Alabama Law Enforcement Agency (ALEA) did not provide documentation to support its monitoring activities for the 7 subrecipients reviewed. ALEA did not have adequate procedures in place to ensure subrecipients were monitored in accordance with the Uniform Guidance. As a result, ALEA did not ensure subrecipients were in compliance with federal requirements.