Reporting Federal Agency: U.S. Department of Agriculture Federal Program Title: Child Nutrition Cluster (CNC) State Administering Department: California Department of Education ALN: 10.553, 10.555, 10.556, 10.559, 10.582 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 247CACA3N1199; October 1, 2023 – September 30, 2024 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements Chapter I – Office of Management and Budget Government-Wide Guidance for Federal Financial Assistance Part 170 – Reporting Subaward and Executive Compensation Information Subpart A – General § 170.105 Applicability (a) Applicability in general. This part applies to a Federal agency’s Federal financial assistance as defined in § 170.300. This part applies to all recipients and subrecipients of Federal awards who meet the reporting requirements of paragraph (c) of this section, unless exempt under Federal statute or by paragraph (d) of this section. Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation (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 (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) 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. (c) Reporting of total compensation of subrecipient executives — (1) Applicability. Unless a first-tier subrecipient is exempt as provided in paragraph (d) of this appendix, the recipient must report the executive total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if: (i) The total Federal funding authorized to date under the subaward equals or exceeds $30,000; (ii) In the subrecipient's preceding fiscal year, the subrecipient received: (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal awards (and subawards) subject to the Transparency Act; and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal awards (and subawards) subject to the Transparency Act; and (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986 after receiving this subaward. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) (2) Reporting Requirements. Subrecipients must report to the recipient their executive total compensation described in paragraph (c)(1) of this appendix. The recipient is required to submit this information to the Federal Funding Accountability and Transparency Act (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) at http://www.fsrs.gov no later than the end of the month following the month in which the subaward was made. As of March 2025, this functionality has been migrated to SAM.gov, which now serves as the system of record for FFATA subaward reporting. Condition: Audit procedures included testing FFATA reporting submissions for 40 subrecipients to evaluate compliance with federal reporting requirements and the design and implementation of internal controls over the FFATA reporting process. Our testing identified that FFATA reports for 40 of the 40 subrecipients were not submitted within the required reporting timeframe. Although the reports were ultimately submitted and the information reported was complete and accurate, the submissions were delayed following the federal government's transition from the FFATA Subaward Reporting System (FSRS.gov) to the SAM.gov Subaward Reporting platform. The transition eliminated the bulk upload functionality previously used by the Department, significantly increasing the manual effort required to complete FFATA reporting while the Department worked to implement the new reporting process. Questioned costs: None Context: See “Condition.” Cause: During fiscal year 2024-25, the U.S. General Services Administration (GSA) transitioned FFATA reporting from FSRS.gov to the SAM.gov Subaward Reporting system. As part of this transition, the bulk upload functionality previously utilized by the Department was not initially available in the new system, significantly increasing the resources needed to prepare and submit FFATA reports. The increased reporting burden, coupled with staffing constraints and technical challenges encountered during implementation of the new reporting platform, contributed to delays in submitting FFATA reports within federally required timeframes. Effect: As a result of the elimination of the bulk upload process, staffing limitations, and implementation challenges associated with the federal reporting system transition, FFATA reports for 40 of 40 subrecipients were not submitted within the federally required reporting deadlines, resulting in noncompliance with FFATA reporting requirements. However, all required reports were ultimately submitted and contained complete and accurate information. Repeat finding: No Recommendation: The Department should evaluate staffing and resource needs associated with FFATA reporting and establish contingency procedures to address significant changes in federal reporting processes. Management should continue to monitor federal system changes, document implementation challenges, and maintain communication with federal agencies when external system limitations affect reporting timeliness. Additionally, the Department should identify and implement process improvements, including available automated reporting solutions and workarounds, to mitigate the impact of future system changes and help ensure FFATA reports are submitted within required timeframes. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reporting Federal Agency: U.S. Department of Agriculture Federal Program Title: Summer Electronic Benefit Transfer Program for Children State Administering Department: California Department of Social Services (CDSS) ALN: 10.646 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 257CDSS7N1175; October 1, 2024 - September 30, 2025 257CDSS6N1803; October 1, 2024 - September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. §200.328 Financial reporting (c) The recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. (d) The final financial report submitted by the recipient must be due no later than 120 calendar days after the conclusion of the period of performance. A subrecipient must submit a final financial report to a pass-through entity no later than 90 calendar days after the conclusion of the period of performance. Title 7 – Agriculture Subtitle B - Regulations of the Department of Agriculture Chapter II - Food and Nutrition Service, Department of Agriculture Subchapter C - Supplemental Nutrition Assistance and Food Distribution Program Part 274 – Issuance and Use of Program Benefits § 274.1 Issuance system approval standards (a) Basic issuance requirements. State agencies shall establish issuance and accountability systems which ensure that only certified eligible households receive benefits; that Program benefits are timely distributed in the correct amounts; and that benefit issuance and reconciliation activities are properly conducted and accurately reported to FNS. § 274.4 Reconciliation and reporting (c) Required reports. The State agency shall review and submit the following reports to FNS on a monthly basis: (1) Form FNS-46, Issuance Reconciliation Report, shall be submitted by each State agency operating an issuance system. The report shall be prepared at the level of the State agency where the actual reconciliation of posted benefits and the master issuance file occurs. (i) The State agency shall identify and report the number and value of all issuances which do not reconcile with the master issuance file. All unreconciled issuances shall be identified as specified on this reporting document. (ii) The report shall be received by FNS no later than 90 days following the end of the report month. Condition: Audit procedures included a review of 3 FNS-46 reports selected from a population of 12 reports submitted during the audit period to determine whether reports were filed in accordance with federal reporting deadlines. Of the 3 reports tested, 2 were not submitted within the required timeframe. Specifically, the reports were submitted 23 and 38 days after the applicable federal due dates. As a result, the Department did not consistently comply with federal reporting requirements for timely submission of FNS-46 reports. Questioned costs: None Context: See “Condition.” Cause: The Department did not maintain sufficiently precise internal controls to ensure FNS-46 reports were prepared, reviewed, and submitted in accordance with federally established reporting deadlines. Specifically, monitoring and supervisory review procedures were not designed or operating at a level of precision sufficient to identify and correct delays in report preparation and submission before the applicable due dates. As a result, late submissions were not detected and resolved in a timely manner. Effect: Failure to submit FNS-46 reports in a timely manner delays federal oversight of S-EBT issuance activity and increases the risk that reconciliation issues, including improper or unsupported issuances, are not promptly identified and resolved. Continued delays may result in noncompliance with federal reporting requirements and reduce the usefulness of reported information for program oversight. Repeat finding: No Recommendation: We recommend that the Department implement controls to ensure timely submission of FNS-46 reports, including establishing a formal reporting calendar aligned with the 90-day requirement, assigning clear responsibility for report preparation and review, and implementing monitoring procedures to track progress and escalate delays. Controls should operate with sufficient precision to ensure all required reports are completed and submitted within prescribed deadlines. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Period of Performance Federal Agency: U.S. Department of Labor Federal Program Title: Unemployment Insurance State Administering Department: Employment Development Department (EDD) ALN: 17.225 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 23A60UB00053; April 1, 2023 - May 22, 2025 23A60UB000081; April 1, 2023 - May 22, 2025 25A60UD000072; January 8, 2025 - January 8, 2028 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subpart E – Cost Principles § 200.403 – Factors affecting allowability of costs Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). Condition: For awards with period of performance start dates occurring during the fiscal year, audit procedures included testing 40 transactions recorded in the general ledger during the initial month of the award. Based on these procedures, we identified five instances where a portion of payroll hours charged to the grant related to services performed prior to the approved period of performance start date of January 8, 2025. The total amount of payroll costs charged outside of the period of performance at the beginning of the award was $12,898. For awards with period of performance end dates occurring during the fiscal year, audit procedures included testing 40 transactions recorded in the general ledger during the final month of the award and subsequent to the period of performance end date. Based on these procedures, we identified 25 instances where a portion of payroll hours charged to the grants related to services performed after the approved period of performance end date of May 22, 2025. The total amount of payroll costs charged outside of the period of performance at the end of the award was $12,968. Questioned costs: $25,866 Context: See “Condition.” Cause: The condition resulted from controls over payroll cost allocation that were not performed with sufficient precision to ensure payroll charges were reviewed against authorized award start and end dates prior to being recorded to Federal awards. As a result, payroll costs incurred outside of the approved period of performance were not prevented or detected in a timely manner. Effect: The Department charged payroll costs to Federal awards outside the approved budget period, resulting in noncompliance with Federal requirements and a potential overstatement of allowable Federal expenditures. Repeat finding: No Recommendation: We recommend that management strengthen internal controls over payroll charging to Federal awards by implementing procedures to verify that project service dates fall within the authorized award dates before costs are charged to the grant. We also recommend the Department implement supervisory or system-based review controls to identify payroll charges posted outside the approved budget period and prevent such costs from being charged to Federal awards. These actions will help ensure payroll costs charged to federal awards are allowable, reduce the risk of unallowable charges, and improve compliance with Uniform Guidance. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reporting Federal Agency: U.S. Department of Labor Federal Program Title: Unemployment Insurance State Administering Department: Employment Development Department (EDD) ALN: 17.225 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: UI347022055A6; April 1, 2020 – June 30, 2025 UI387882255A6; April 1, 2022 – May 22, 2025 23A60UR000018; January 1, 2023 – September 30, 2025 23A55UD000003; February 27, 2023 – September 30, 2025 23A60UB000081; April 1, 2023 – May 22, 2025 23A55UD000007; April 27, 2023 – April 26, 2026 24A55UT000026; October 1, 2023 – September 30, 2024 24A60UD000027; February 19, 2024 – February 19, 2027 25A55UE000010; July 1, 2024 – December 31, 2025 25A60UD000072; January 8, 2025 – January 8, 2028 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Subtitle B – Federal Agency Regulations for Grants and Agreements Chapter XXIX – Department of Labor Part 2900 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart D – Post Federal Award Requirements § 2900.14 – Financial reporting In addition to the guidance set forth in 2 CFR 200.328, for Federal awards from the Department of Labor, the DOL awarding agency will prescribe whether the report will be on a cash or an accrual basis. If the DOL awarding agency requires reporting on an accrual basis and the recipient's accounting system is not on the accrual basis, the recipient will not be required to convert its accounting system, but must develop and report such accrual information through best estimates based on an analysis of the documentation on hand. ETA-9130 Reporting Requirements 1) Submission of the ETA-9130 is required on a quarterly basis. Reporting quarter end dates shall correspond to the following calendar quarter end dates: March 31, June 30, September 30, and December 31. A final quarter ETA-9130 is required at the completion of the quarter, encompassing the grant award end date, or at the completion of the quarter in which all funds have been expended, whichever comes first. 2) Quarterly reports, including the final quarter report, are required to be submitted no later than 45 calendar days after the end of each specified reporting period. The reporting due dates are: May 15, August 15, November 15, and February 15. The deadlines for ETA-9130 submissions do not change, even in instances when the reporting due date falls on a weekend or holiday. The e-reporting system is available 24 hours a day, 7 days a week, and reports can be submitted in advance of the due date. 3) All financial data is required to be reported cumulative from grant inception, through the end of each reporting period. Expenditure data is required to be reported on an accrual basis. 4) A separate ETA-9130 is required for each program and each fund source (subaccount) awarded to a grant recipient. 5) All sections of the report must be completed unless otherwise noted in the grant agreement Condition: Audit procedures included a review of the entire population of Form 9130 reports for administrative expenses, consisting of 22 reports. Our testing identified that certain reported amounts did not agree to the underlying general ledger for 12 reports, resulting in a total variance of $32,843,139. Additionally, audit procedures identified that internal controls over reporting were not operating effectively to ensure the timely and accurate submission of reports. Specifically, six reports were not submitted by the required due dates, and 12 reports contained inaccuracies at the time of submission, and controls were not performed with sufficient precision to verify that reported information was complete and accurate in accordance with federal reporting requirements. Questioned costs: None Context: See “Condition.” Cause: The controls over the preparation and review of Form 9130 reports that were not performed with sufficient precision to identify and resolve discrepancies between reported amounts and the underlying general ledger. Specifically, controls were not designed or operating at a level precise enough to ensure that reported data was accurate, reconciled, and submitted in a timely manner in accordance with federal requirements. As a result, variances and reporting errors were not detected or corrected prior to submission. Effect: The lack of a robust and thorough reconciliation process between Form 9130 reports and the Administrative Fund (870) general ledger may lead to inaccurate reporting. Repeat finding: Yes – 2024-003 Recommendation: Management should establish a formal reconciliation process to ensure that Form 9130 administrative expense reports align with the general ledger. This process should include assigning responsibility to a designated finance team member for performing and documenting reconciliations, implementing a monthly reconciliation schedule, and promptly investigating and resolving any variances with documented approvals. Additionally, financial reporting policies should be updated to incorporate reconciliation requirements, and staff should receive training on compliance and reconciliation procedures to strengthen internal controls and reduce the risk of reporting inaccuracies. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Special Tests and Provisions Federal Agency: U.S. Department of Labor Federal Program Title: Unemployment Insurance State Administering Department: Employment Development Department (EDD) ALN: 17.225 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 24A55UI000061; October 1, 2023 - December 31, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 42 – The Public Health and Welfare Chapter 7 – Social Security Subchapter III – Grants to States for Unemployment Compensation Administration § 503 – State laws (g) Recovery of unemployment benefit payments (1) A State shall deduct from unemployment benefits otherwise payable to an individual an amount equal to any overpayment made to such individual under an unemployment benefit program of the United States or of any other State, and not previously recovered. The amount so deducted shall be paid to the jurisdiction under whose program such overpayment was made. Any such deduction shall be made only in accordance with the same procedures relating to notice and opportunity for a hearing as apply to the recovery of overpayments of regular unemployment compensation paid by such State. 2025 California Code Unemployment Insurance Code - UIC Division 1 – Unemployment and Disability Compensation Part 1 – Unemployment Compensation Chapter 5 - Unemployment Compensation Benefits Article 1 – Eligibility and Disqualifications Section 1257 An individual is also disqualified for unemployment compensation benefits if: (a) He or she willfully, for the purpose of obtaining unemployment compensation benefits, either made a false statement or representation, including, but not limited to, using a false name, false social security number, or other false identification, with actual knowledge of the falsity thereof, or withheld a material fact in order to obtain any unemployment compensation benefits under this division. Article 4 - Overpayments Section 1375.1 If the director finds that an individual has been overpaid unemployment compensation benefits because he or she willfully, for the purpose of obtaining unemployment compensation benefits, either made a false statement or representation, with actual knowledge of the falsity thereof, or withheld a material fact, the director shall assess against the individual an amount equal to 30 percent of the overpayment amount. Assessments collected under this section shall be deposited in the following manner: (a) For penalty assessments established prior to October 22, 2013, 100 percent of the overpayment penalty amount in the Benefit Audit Fund. (b) For penalty assessments established on or after October 22, 2013, as follows: (1) 50 percent of the overpayment penalty amount in the Unemployment Trust Fund. (2) 50 percent of the overpayment penalty amount in the Benefit Audit Fund. Condition: Audit procedures included testing 60 overpayment case files to assess whether overpayments were properly established and whether penalties were applied in accordance with program requirements. Based on this testing, we identified one instance of noncompliance in which an overpayment met the criteria for the assessment of a penalty; however, the Department did not apply the required 30 percent penalty to the overpayment amount. Questioned costs: None Context: See “Condition.” Cause: The controls over the review and approval of overpayment determinations that were not performed with sufficient precision to ensure that cases meeting the criteria for penalty assessment were consistently identified and evaluated. Specifically, controls were not operating at a level precise enough to verify that overpayment cases involving willful misrepresentation or omission of material facts were subject to the required review for application of the 30 percent penalty prior to finalization. As a result, penalties required under program provisions were not consistently applied. Effect: As a result of controls not operating with sufficient precision to ensure proper evaluation of overpayment cases, penalties required under program provisions were not consistently assessed. This resulted in noncompliance with applicable requirements and increases the risk that overpayments may not be fully recovered, thereby reducing program collections and weakening the Department’s enforcement of program rules. Repeat finding: Yes – 2024-004 Recommendation: We recommend that management strengthen internal controls over overpayment determinations to ensure penalties are assessed when required. Specifically, the Department should implement procedures requiring personnel to evaluate whether an overpayment resulted from a willful false statement or representation, with actual knowledge of the falsity, or withholding of a material fact for the purpose of obtaining unemployment compensation benefits, and, when those conditions are present, apply the required 30 percent penalty before the overpayment determination is finalized. We also recommend the Department implement supervisory review or system-based controls to identify cases in which the facts support penalty assessment, but the penalty has not been applied. These actions will help ensure overpayments and related penalties are properly established, improve compliance with applicable requirements, and reduce the risk of underassessment. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reporting Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Aging Cluster State Administering Department: California Department of Aging ALN: 93.044, 93.045, 93.053 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2401CAOACM; October 1, 2023 – September 30, 2025 2401CAOAHD; October 1, 2023 – September 30, 2025 2401CAOANS; October 1, 2023 – September 30, 2025 2401CAOASS; October 1, 2023 – September 30, 2025 2501CAOACM; October 1, 2024 – September 30, 2026 2501CAOAHD; October 1, 2024 – September 30, 2026 2501CAOANS; October 1, 2024 – September 30, 2026 2501CAOASS; October 1, 2024 – September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements Chapter I – Office of Management and Budget Government-Wide Guidance for Federal Financial Assistance Part 170 – Reporting Subaward and Executive Compensation Information Subpart A – General § 170.105 Applicability (a) Applicability in general. This part applies to a Federal agency’s Federal financial assistance as defined in § 170.300. This part applies to all recipients and subrecipients of Federal awards who meet the reporting requirements of paragraph (c) of this section, unless exempt under Federal statute or by paragraph (d) of this section. Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation (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 (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) 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. (c) Reporting of total compensation of subrecipient executives — (1) Applicability. Unless a first-tier subrecipient is exempt as provided in paragraph (d) of this appendix, the recipient must report the executive total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if: (i) The total Federal funding authorized to date under the subaward equals or exceeds $30,000; (ii) In the subrecipient's preceding fiscal year, the subrecipient received: (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal awards (and subawards) subject to the Transparency Act; and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal awards (and subawards) subject to the Transparency Act; and (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986 after receiving this subaward. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) (2) Reporting Requirements. Subrecipients must report to the recipient their executive total compensation described in paragraph (c)(1) of this appendix. The recipient is required to submit this information to the FFATA subaward reporting functionality (formerly FSRS and now reported through SAM.gov) at http://www.fsrs.gov no later than the end of the month following the month in which the subaward was made. As of March 2025, this functionality has been migrated to SAM.gov, which now serves as the system of record for FFATA subaward reporting. Condition: Audit procedures included a review of 60 FFATA reporting submissions associated with subrecipients. During this review, we assessed compliance with federal reporting requirements and evaluated the adequacy of internal controls over the FFATA reporting process. Of the 60 subrecipients examined, we identified that FFATA reporting was not performed timely for 31 subrecipients. Additionally, audit procedures further determined that reporting was only being performed once annually for all sampled subrecipients, rather than on an ongoing basis as required. The department lacked documented procedures and monitoring mechanisms to ensure timely and accurate reporting, including verification that subrecipient data was submitted in accordance with federal requirements. Questioned costs: None Context: See “Condition.” Cause: Procedures to perform the required FFATA reporting were not established by the Department. The absence of documented policies, assigned responsibilities, and monitoring mechanisms create an environment which may result in noncompliance with federal reporting. Effect: The lack of established procedures and internal controls for FFATA reporting resulted in noncompliance, with 31 out of 60 subrecipients not reported timely as required. Repeat finding: Yes, 2024-013 Recommendation: The Department should implement a robust process and related internal controls to ensure timely and accurate FFATA reporting. These controls should include developing written policies and procedures that outline the steps for collecting subrecipient data, preparing reports, and submitting them within required timelines; assigning accountability by designating specific personnel responsible for compliance; and implementing a monitoring and review process to verify completion and accuracy of reporting. Additionally, training programs should be established to ensure staff understand reporting requirements, and automated tracking tools or checklists should be utilized to provide transparency and reduce the risk of missed submissions. By introducing these internal controls, the Department can strengthen its compliance framework, mitigate the risk of federal funding repercussions, and enhance overall operational integrity. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Subrecipient Monitoring Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Aging Cluster State Administering Department: California Department of Aging ALN: 93.044, 93.045, 93.053 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2401CAOACM; October 1, 2023 – September 30, 2025 2401CAOAHD; October 1, 2023 – September 30, 2025 2401CAOANS; October 1, 2023 – September 30, 2025 2401CAOASS; October 1, 2023 – September 30, 2025 2501CAOACM; October 1, 2024 – September 30, 2026 2501CAOAHD; October 1, 2024 – September 30, 2026 2501CAOANS; October 1, 2024 – September 30, 2026 2501CAOASS; October 1, 2024 – September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. §200.332 Requirements for passthrough entities (2 CFR 200.332): All pass-through entities must: (a) Verify that the subrecipient is not excluded or disqualified in accordance with §180.300. Verification methods are provided in §180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. Condition: Audit procedures included a review of eight subrecipient agreements to determine whether the Department complied with federal suspension and debarment requirements for covered transactions. The subrecipient agreements reviewed did not contain a suspension and debarment certification clause indicating that the subrecipient was not suspended or debarred from participation in federally funded programs. Furthermore, the Department was unable to provide documentation demonstrating that suspension and debarment verification procedures, such as a review of the System for Award Management (SAM), had been performed prior to entering into the covered transactions. As part of audit procedures, we independently verified the suspension and debarment status of all subrecipients tested through a review of the SAM Exclusions database and noted that none were suspended or debarred at the time of our testing. Questioned costs: None Context: See “Condition.” Cause: Controls designed to ensure compliance with federal suspension and debarment requirements were not operating with sufficient precision to verify and document the eligibility of subrecipients prior to entering into covered transactions. Specifically, personnel responsible for administering the program had not established or consistently performed procedures to verify suspension and debarment status through SAM or obtain required certifications, resulting in unsupported compliance with 2 CFR §200.214 and 2 CFR Part 180. Effect: Failure to verify and document suspension and debarment status prior to entering into covered transactions results in noncompliance with 2 CFR §180.300 and increases the risk that federal funds could be awarded to subrecipients that are suspended or debarred from participation in federally funded programs. Although the audit's independent verification determined that none of the subrecipients tested were suspended or debarred, the lack of documented verification procedures prevents the Department from demonstrating compliance with federal requirements and increases the risk that ineligible parties could be engaged in future transactions. Repeat finding: No Recommendation: The Department should review and strengthen its procedures for verifying the suspension and debarment status of subrecipients before entering into any agreement involving federal funds and ensure that the verification documentation is maintained. Alternatively, incorporate a clause in subrecipient contracts certification of their suspension or debarment status. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Epidemiology and Laboratory Capacity for Program Infectious Diseases (ELC) State Administering Department: California Department of Public Health ALN: 93.323 Pass-Through Agency: Heluna Health Pass-Through Number(s): 95-2557063 Award Number and Period: NU50CK000539; August 1, 2019 – July 31, 2027 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subpart E – Cost Principles § 200.403 – Factors affecting allowability of costs Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). Condition: For awards with period of performance end dates occurring during the fiscal year, audit procedures included testing transactions recorded in the general ledger during the final month and after of the award. We tested a sample of nineteen transactions totaling $2,643,649. Our testing identified three transactions, totaling $33,571, for which costs were incurred after the ending of the period of performance. Specifically, the award period end date on July 31, 2024; however, the associated costs were incurred between August 1, 2024 and February 28, 2025. Questioned costs: $66,833 ($33,571 related to the sample tested and $33,262 in the untested population). Context: See “Condition.” Cause: Controls over the review of expenditures at the end of the period of performance were not operating with sufficient precision to ensure that only allowable costs incurred before the award end date were charged to the appropriate Federal award. Specifically, management did not consistently apply procedures to verify that expenditures were recorded to the correct grant and within the applicable period of performance, resulting in the misclassification of post-award costs to the grant. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. Repeat finding: No Recommendation: The Department should strengthen controls over grant accounting by implementing procedures to ensure that expenditures are both charged to the correct grant and incurred within the applicable period of performance. This should include establishing controls to verify grant coding and transaction dates prior to posting or reimbursement, as well as enhancing supervisory review processes to detect and prevent misclassification of expenditures and the recording of unallowable post-award costs. Additionally, the Department should provide training to personnel responsible for grant accounting on proper grant coding and period-ofperformance requirements. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Suspension and Debarment Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Epidemiology and Laboratory Capacity for Program Infectious Diseases (ELC) State Administering Department: California Department of Public Health ALN: 93.323 Pass-Through Agency: Heluna Health Pass-Through Number(s): 95-2557063 Award Number and Period: NU50CK000539; August 1, 2019 – July 31, 2027 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.214 – Suspension and debarment. Non-Federal entities are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter I – Office of Management and Budget Government-Wide Guidance for Grants and Agreements. Part 180 – OMB Guidelines to Agencies on Government- Wide Debarment and Suspension (Non-procurement). Subpart C – Responsibilities of Participants Regarding Transactions Doing Business With Other Persons §180.300 (2 CFR 180.300): 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 may do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or a condition to the covered transactions with that person. Condition: Audit procedures included a review of nine vendor contracts and eleven subrecipient agreements to determine whether the Department complied with federal suspension and debarment requirements for covered transactions. Of the nine vendor contracts reviewed, six (67%) did not contain a suspension and debarment certification clause indicating that the contractor was not suspended or debarred from participation in federally funded programs. In addition, all eleven (100%) subrecipient agreements reviewed did not contain a suspension and debarment certification clause indicating that the subrecipient was not suspended or debarred from participation in federally funded programs. Furthermore, the Department was unable to provide documentation demonstrating that suspension and debarment verification procedures, such as a review of the System for Award Management (SAM), had been performed prior to entering into the covered transactions. As part of audit procedures, we independently verified the suspension and debarment status of all vendors and subrecipients tested through a review of the SAM Exclusions database and noted that none were suspended or debarred at the time of our testing. However, the Department's records did not demonstrate compliance with the federal requirement to verify the eligibility of contractors and subrecipients prior to entering into covered transactions. This condition is not in compliance with the suspension and debarment requirements contained in 2 CFR Part 180, as adopted by 2 CFR §200.214. Questioned costs: None Context: See “Condition.” Cause: Controls designed to ensure compliance with federal suspension and debarment requirements were not operating with sufficient precision to verify and document the eligibility of contractors and subrecipients prior to entering into covered transactions. Specifically, personnel responsible for administering the ELC program had not established or consistently performed procedures to verify suspension and debarment status through SAM or obtain required certifications, resulting in unsupported compliance with 2 CFR §200.214 and 2 CFR Part 180. Effect: Failure to verify and document suspension and debarment status prior to entering into covered transactions results in noncompliance with 2 CFR §180.300 and increases the risk that federal funds could be awarded to contractors or subrecipients that are suspended or debarred from participation in federally funded programs. Although the audit's independent verification determined that none of the vendors or subrecipients tested were suspended or debarred, the lack of documented verification procedures prevents the Department from demonstrating compliance with federal requirements and increases the risk that ineligible parties could be engaged in future transactions. Repeat finding: Yes – 2024-008 Recommendation: Public Health should review and strengthen its procedures for verifying the suspension and debarment status of vendors and subrecipients before entering into any agreement involving federal funds and ensure that the verification documentation is maintained. Alternatively, incorporate a clause in vendor and subrecipient contracts certification of their suspension or debarment status. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Subrecipient Monitoring Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Epidemiology and Laboratory Capacity for ProgramInfectious Diseases (ELC) State Administering Department: California Department of Public Health ALN: 93.323 Pass-Through Agency: Heluna Health Pass-Through Number(s): 95-2557063 Award Number and Period: NU50CK000539; August 1, 2019 – July 31, 2027 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. § 200.332 – Requirements for pass-though entities A pass-through entity must: (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information provided below. A pass-through entity must provide the best available information when some of the information below is unavailable. A pass-through entity must provide the unavailable information when it is obtained. Required information includes: (1) Federal award identification. (i) Subrecipient's name (must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated in the subaward; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity, including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of the Federal 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; (xiii) Identification of whether the Federal award is for research and development; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is used in accordance with § 200.414). Condition: Audit procedures included a review of eleven subrecipient agreements to determine whether the pass-through entity included the information required to be communicated to subrecipients in accordance with Uniform Guidance. Of the eleven agreements tested, all eleven (100%) did not contain one or more required federal award identification elements. Specifically, the agreements omitted the subrecipient’s Unique Entity Identifier (UEI), the Federal Award Identification Number (FAIN), the Federal award date, the applicable Assistance Listing Number (ALN), identification of whether the award was designated as research and development (R&D), and the applicable indirect cost rate for the federal award, including whether the de minimis indirect cost rate authorized under 2 CFR §200.414 was being used. As a result, the subrecipient agreements did not include all information required to be provided to subrecipients under 2 CFR §200.332(b). Questioned costs: None Context: See “Condition.” Cause: Controls designed to ensure the inclusion of all federally required award identification information in subrecipient agreements were not operating with sufficient precision to identify and prevent the omission of required elements prior to execution of the agreements. As a result, agreements were issued without all information required under 2 CFR §200.332(b), including the UEI, FAIN, Federal award date, ALN, identification of whether the award was designated as R&D, and the applicable indirect cost rate. Effect: The omission of required federal award information from subrecipient agreements may limit subrecipients' understanding of applicable federal award requirements and increase the risk of noncompliance with federal regulations. Incomplete award information may also result in inaccurate or inconsistent administration, monitoring, and reporting of federal awards by subrecipients and the pass-through entity. Repeat finding: Yes – 2024-009 Recommendation: Public Health should ensure every subaward includes all requirements imposed on the subrecipient so that the federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the federal award. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reporting Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Foster Care Title IV-E State Administering Department: California Department of Social Services (CDSS) ALN: 93.658 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2501CAFOST; October 1, 2024- September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements Chapter I – Office of Management and Budget Government-Wide Guidance for Federal Financial Assistance Part 170 – Reporting Subaward and Executive Compensation Information Subpart A – General § 170.105 Applicability (a) Applicability in general. This part applies to a Federal agency’s Federal financial assistance as defined in § 170.300. This part applies to all recipients and subrecipients of Federal awards who meet the reporting requirements of paragraph (c) of this section, unless exempt under Federal statute or by paragraph (d) of this section. Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation (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 (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) 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. (c) Reporting of total compensation of subrecipient executives — (1) Applicability. Unless a first-tier subrecipient is exempt as provided in paragraph (d) of this appendix, the recipient must report the executive total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if: (i) The total Federal funding authorized to date under the subaward equals or exceeds $30,000; (ii) In the subrecipient's preceding fiscal year, the subrecipient received: (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal awards (and subawards) subject to the Transparency Act; and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal awards (and subawards) subject to the Transparency Act; and (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986 after receiving this subaward. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) (2) Reporting Requirements. Subrecipients must report to the recipient their executive total compensation described in paragraph (c)(1) of this appendix. The recipient is required to submit this information to the FFATA subaward reporting functionality (formerly FSRS and now reported through SAM.gov) at http://www.fsrs.gov no later than the end of the month following the month in which the subaward was made. As of March 2025, this functionality has been migrated to SAM.gov, which now serves as the system of record for FFATA subaward reporting. Condition: Audit procedures included a review of the entire population of 58 FFATA subaward submissions for the Foster Care program reported in SAM.gov during the year ended June 30, 2025, and a comparison of those submissions to the related funding actions. Testing identified that all 58 subawards, representing 100 percent of the population, were reported after the required reporting deadline. Based on inquiry and review of supporting documentation, CDSS prepared and submitted the FFATA reporting file; however, certain submitted records were rejected by the reporting system and required correction and resubmission. Because the submission and review process was performed too close to the applicable reporting deadline, there was insufficient time to identify, resolve, and successfully resubmit the rejected records before the deadline. As a result, FFATA subaward information was not reported within the timeframe required by federal reporting requirements. The results of testing indicate that controls over FFATA reporting did not operate with sufficient precision to ensure submitted records were timely reviewed, validated, and accepted prior to applicable reporting deadlines. Accordingly, FFATA reporting was not consistently completed in a timely manner in accordance with federal requirements. Questioned costs: None Context: See “Condition.” Cause: CDSS did not maintain controls over the FFATA reporting process that operated with sufficient precision to ensure subaward submissions were completed, validated, and accepted before applicable federal reporting deadlines. Specifically, FFATA reports were submitted too near the reporting deadline to allow sufficient time to identify, investigate, and correct rejected submissions. In addition, CDSS did not have monitoring procedures to review submission status, follow up on system-generated rejection notices, and verify that all submitted records had been successfully accepted in SAM.gov before the reporting deadline. As a result, submission errors were not resolved timely, resulting in late reporting of all reportable subawards. Effect: Untimely reporting reduced the timeliness, transparency, and reliability of publicly available federal spending information and limited the ability of federal agencies, oversight bodies, and the public to promptly monitor the distribution of federal funds to subrecipients. In addition, the lack of controls to timely identify and resolve rejected submissions increases the risk that future FFATA reporting deadlines may not be met. Repeat finding: No Recommendation: We recommend that CDSS strengthen its department-wide controls over FFATA reporting to ensure reportable subawards are identified, reviewed, and submitted within required federal reporting deadlines. Specifically, CDSS should establish and implement centralized procedures to track subaward actions, amendments, allocation changes, and other reportable funding events; monitor applicable FFATA reporting deadlines; and maintain documentation demonstrating that reportable subawards have been evaluated and reported timely. In addition, CDSS should implement review controls that operate with sufficient precision to verify that all reportable subawards have been identified, reporting deadlines have been met, and FFATA submissions are complete, accurate, and supported by underlying award documentation prior to submission in SAM.gov. These procedures should include documented supervisory review, reconciliation of reportable subaward activity to source documentation, and periodic monitoring to identify and resolve untimely or omitted submissions. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. Response to views of responsible officials: We acknowledge CDSS's position that an initial FFATA submission was made on November 27, 2024, and that only two records required correction and resubmission. However, CDSS did not provide sufficient documentation to support the asserted November 27 submission date, such as submission confirmations, systemgenerated reports, audit logs, or other contemporaneous evidence demonstrating that the subaward information was successfully submitted before the reporting deadline. The audit evidence available for inspection reflected a submission date after the required deadline for all 58 Foster Care subawards. Although CDSS indicated that only two records failed during the original upload process, documentation supporting that assertion and the cause of the upload failure was not provided for audit review. Accordingly, based on the evidence available, we were unable to verify that FFATA reporting requirements were met by the applicable deadline. Therefore, we continue to conclude that the finding is valid as presented.
Special Tests and Provisions Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Foster Care Title IV-E State Administering Department: California Department of Social Services (CDSS) ALN: 93.658 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2401CAFOST; October 1, 2023- September 30, 2024 2501CAFOST; October 1, 2024- September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 45 – Public Welfare Subtitle B – Regulations Relating to Public Welfare Chapter XIII – Administration for Children and Families, Department of Health and Human Services Subpart G – The Administration on Children, Youth and Families, Foster Care Maintenance Payments, Adoption Assistance, and Child and Family Services Part 1356 – Requirements Applicable to Title IV-E § 1356.21 – Foster care maintenance payments program implementation requirements (a) Statutory and regulatory requirements of the Federal foster care program To implement the foster care maintenance payments program provisions of the title IV-E plan and to be eligible to receive Federal financial participation (FFP) for foster care maintenance payments under this part, a title IV-E agency must meet the requirements of this section, 45 CFR 1356.22, 45 CFR 1356.30, and sections 472, 475(1), 475(4), 475(5), 475(6), and for a Tribal title IV-E agency section 479(B)(c)(1)(C)(ii)(II) of the Act. (m) Review of payments and licensing standards In meeting the requirements of section 471(a)(11) of the Act, the title IV-E agency must review at reasonable, specific, time-limited periods to be established by the agency: (1) The amount of the payments made for foster care maintenance to assure their continued appropriateness, and that the amount made to a licensed or approved relative or kinship foster family home is the same as the amount that would have been made if the child was placed in a licensed or approved non-relative foster family home; § 1356.60 Fiscal requirements (title IV-E) (a) Federal matching funds for foster care maintenance and adoption assistance payments. (1) Federal financial participation (FFP) is available to title IV-E agencies under an approved title IV-E plan for allowable costs in expenditures for: (i) Foster care maintenance payments as defined in section 475(4) of the Act, made in accordance with §§ 1356.20 through 1356.30, section 472 of the Act. (c) Federal matching funds for other title IV-E agency administrative expenditures for foster care and adoption assistance under title IV-E Federal financial participation is available at the rate of fifty percent (50%) for administrative expenditures necessary for the proper and efficient administration of the title IV-E plan. The State's cost allocation plan shall identify which costs are allocated and claimed under this program. Condition: Audit procedures included testing 60 county claims for reimbursement and evaluating whether the payment rates applied were consistent with applicable foster care ratesetting guidance issued by the California Department of Social Services (CDSS). Of the 60 claims tested, 19 utilized rates that did not agree to the authorized rates in effect at the time the reimbursement was claimed. The differences between the rates applied and the authorized rates ranged from approximately 1% to 43%, indicating that reimbursement calculations were not consistently based on current statewide rate guidance. Foster care rate-setting guidance is updated periodically throughout the fiscal year and requires counties to implement revised rates as changes become effective. Testing indicated that counties did not consistently implement updated rates, and CDSS did not maintain monitoring procedures that operated with sufficient precision to verify the timely adoption of revised rates or to identify and correct the use of outdated rates. As a result, reimbursement claims were not consistently calculated using current authorized payment rates. Accordingly, CDSS did not maintain effective internal controls to ensure foster care reimbursement payments were consistently determined using current, authorized rates in accordance with applicable program requirements. Questioned costs: None Context: See “Condition.” Cause: CDSS did not maintain internal controls that operated with sufficient precision to ensure updated foster care rate-setting guidance was timely communicated, implemented, and consistently applied by counties. Specifically, monitoring controls were not designed or performed at a level capable of verifying county adoption of revised rates, identifying instances in which outdated rates continued to be used, or timely detecting and correcting rate discrepancies. As a result, changes to authorized statewide rates were not consistently incorporated into county reimbursement calculations, increasing the risk that payments were calculated using outdated rate schedules. Effect: The use of outdated rates resulted in foster care payments that were not consistently based on current authorized rate schedules, increasing the risk that expenditures charged to the program were misstated. Specifically, payments may have been overpaid or underpaid and were not consistently supported as allowable foster care maintenance or administrative expenditures. In addition, the lack of monitoring over implementation of updated rates reduces assurance that costs were properly calculated, applied, and classified in accordance with program requirements, affecting the reliability of reported expenditures. Repeat finding: No Recommendation: CDSS should strengthen internal controls over payment rate setting by establishing procedures to ensure that rate updates are timely implemented and consistently applied. This should include issuing clear implementation guidance to counties when rate changes occur, requiring confirmation of adoption of updated rates, and performing periodic monitoring or reconciliations to verify that payment rates used in county claims align with current authorized rate schedules. CDSS should also implement review controls to identify and correct instances where outdated rates are used before claims are finalized and reported. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant/Child Care Mandatory and Matching Funds of the Child Care and Development Fund State Administering Department: California Department of Social Services (CDSS) ALN: 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2534CACCDD; October 1, 2024 – September 30, 2027 2534CACCDM; October 1, 2024 – September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subpart E – Cost Principles § 200.403 – Factors affecting allowability of costs Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). Condition: For awards with period of performance start dates occurring during the fiscal year, audit procedures included testing 60 transactions recorded in the general ledger during the initial month of the award. Based on these procedures, we identified 25 instances where a portion of costs charged to the grant related to services performed prior to the approved period of performance start date of October 1, 2024. The total amount of costs charged outside of the period of performance at the beginning of the award was $7,013,956. Questioned costs: $7,013,956 Context: See “Condition.” Cause: The condition is due to ineffective controls over aligning expenditure recording with the approved period of performance, including insufficient review procedures to ensure that costs are charged to Federal awards based on the actual service period rather than timing of payment or accrual. In addition, controls did not adequately prevent or detect the systematic charging of pre-award service costs to newly awarded funding sources. Effect: Charging costs incurred prior to the period of performance results in noncompliance with Federal requirements and causes expenditures to be improperly shifted to ineligible funding periods. This practice overstates allowable costs at the beginning of the award and increases the risk that funds are used for activities not authorized under the award, potentially resulting in questioned costs and required repayment. Repeat finding: No Recommendation: We recommend that management strengthen internal controls over costs charged to Federal awards by implementing procedures to ensure that expenditures are aligned with the approved period of performance. This should include controls to verify, prior to recording, that service periods and underlying activities fall within authorized award dates. In addition, the Department should implement supervisory and/or system-based controls to detect and prevent costs recorded outside the period of performance, including mechanisms that flag transactions associated with pre-award or post-expiration service periods and ensure that costs are consistently charged to the appropriate funding source based on when services were performed. These actions will help ensure that costs charged to Federal awards are allowable and properly timed, reduce the risk of unallowable charges, and improve compliance with period of performance requirements under Uniform Guidance. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reporting Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant/Child Care Mandatory and Matching Funds of the Child Care and Development Fund State Administering Department: California Department of Social Services (CDSS) ALN: 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2101CACDC6; October 1, 2020 – September 30, 2024 2334CACCDD; October 1, 2022 – September 30, 2025 2334CACCDF; October 1, 2022 – September 30, 2025 2334CACCDM; October 1, 2022 – September 30, 2025 2434CACCDD; October 1, 2023 – September 30, 2026 2434CACCDF; October 1, 2023 – September 30, 2026 2434CACCDM; October 1, 2023 – September 30, 2025 2534CACCDD; October 1, 2024 – September 30, 2027 2534CACCDF; October 1, 2024 – September 30, 2027 2534CACCDM; October 1, 2024 – September 30, 2026 2534CACCDY; December 21, 2024 – September 30, 2028 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Complianceand Material Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. §200.328 Financial reporting (c) The recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. (d) The final financial report submitted by the recipient must be due no later than 120 calendar days after the conclusion of the period of performance. A subrecipient must submit a final financial report to a pass-through entity no later than 90 calendar days after the conclusion of the period of performance. § 200.329 Monitoring and reporting program performance (a) Monitoring by the recipient and subrecipient The recipient and subrecipient are responsible for the oversight of the Federal award. The recipient and subrecipient must monitor their activities under Federal awards to ensure they are compliant with all requirements and meeting performance expectations. Monitoring by the recipient and subrecipient must cover each program, function, or activity. See also § 200.332. Title 45 – Public Welfare Subtitle A – Department of Health and Human Services Subchapter A – General Administration Part 98 – Child Care and Development Fund Subpart G – Financial Management § 98.60 – Availability of funds (d) 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. (2)(i) Mandatory Funds for States requesting Matching Funds per § 98.55 shall be obligated in the fiscal year in which the funds are granted and are available until expended. (4) Both the Federal and non-Federal share of the Matching Fund shall be obligated in the fiscal year in which the funds are granted and liquidated no later than the end of the succeeding fiscal year. (5) Determination of whether funds have been obligated and liquidated will be based on State or local law or, if there is no applicable State or local law, the regulation at 2 CFR 200.1, Expenditures and Obligations. § 98.65 Audits and financial reporting (a) Each Lead Agency shall have an audit conducted after the close of each program period in accordance with 2 CFR part 200, subpart F, and the Single Audit Act Amendments of 1996. (b) Lead Agencies are responsible for ensuring that subgrantees are audited in accordance with appropriate audit requirements. (c) Not later than 30 days after the completion of the audit, Lead Agencies shall submit a copy of their audit report to the legislature of the State or, if applicable, to the Tribal Council(s). Lead Agencies shall also submit a copy of their audit report to the HHS Inspector General for Audit Services, as well as to their cognizant agency, if applicable. (d) Any amounts determined through an audit not to have been expended in accordance with these statutory or regulatory provisions, or with the Plan, and that are subsequently disallowed by the Department shall be repaid to the Federal government, or the Secretary will offset such amounts against any other CCDF funds to which the Lead Agency is or may be entitled. (e) Lead Agencies shall provide access to appropriate books, documents, papers and records to allow the Secretary to verify that CCDF funds have been expended in accordance with the statutory and regulatory requirements of the program, and with the Plan. (f) The audit required in paragraph (a) of this section shall be conducted by an agency that is independent of the State, Territory or Tribe as defined by generally accepted government auditing standards issued by the Comptroller General, or a public accountant who meets such independent standards. (g) Lead Agencies shall submit financial reports, in a manner specified by ACF, quarterly for each fiscal year until funds are expended. (h) At a minimum, a State or territorial Lead Agency's quarterly report shall include the following information on expenditures under CCDF grant funds, including Discretionary (which includes realloted funding and any funds transferred from the TANF block grant), Mandatory, and Matching Funds (which includes redistributed funding); and State Matching and Maintenance-of- Effort (MOE) Funds: (1) Child care administration; (2) Quality activities, including any sub-categories of quality activities as required by ACF; (3) Direct services for both grant or contracted slots and certificates; (4) Non-direct services, including: (i) Establishment and maintenance of computerized child care information systems; (ii) Certificate program cost/eligibility determination; (iii) All other non-direct services; and (5) Such other information as specified by the Secretary. § 98.67 – Fiscal requirements (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (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. Condition: Audit procedures included a review of the entire population of ACF-696 financial reports submitted for the CCDF Cluster. Our testing identified that certain reported amounts did not agree or reconcile to the underlying general ledger, resulting in a total variance of $491,119,535. Additionally, audit procedures identified that internal controls over reporting were not operating effectively to ensure the accurate submission of reports. Specifically, certain reports contained inaccuracies at the time of submission, and controls were not performed with sufficient precision to verify that reported information was complete and accurate in accordance with federal reporting requirements. Questioned costs: None Context: See “Condition.” Cause: The controls over the preparation and review of ACF-696 reports were not performed with sufficient precision to identify and resolve discrepancies between reported amounts and the underlying general ledger. Specifically, controls were not designed or operating at a level precise enough to ensure that reported data was accurate, reconciled, and submitted in a timely manner in accordance with federal requirements. As a result, variances and reporting errors were not detected or corrected prior to submission. Effect: Without a documented reconciliation between the ACF-696 reports and the general ledger, the Department cannot demonstrate that reported expenditures were accurate, complete, and supported by accounting records. This increases the risk that expenditures, obligations, liquidations, unobligated balances, or expenditure categories reported to ACF may be misstated. Inaccurate ACF-696 reporting may affect ACF’s ability to monitor compliance with CCDF spending, obligation, liquidation, and availability requirements. Repeat finding: Yes – 2024-015 Recommendation: Management should establish a formal reconciliation process to ensure that ACF-696 expense reports align with the general ledger. This process should include assigning responsibility to a designated finance team member for performing and documenting reconciliations, implementing a monthly reconciliation schedule, and promptly investigating and resolving any variances with documented approvals. Additionally, financial reporting policies should be updated to incorporate reconciliation requirements, and staff should receive training on compliance and reconciliation procedures to strengthen internal controls and reduce the risk of reporting inaccuracies. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. Response to views of responsible officials: We acknowledge management's explanation that variances between the ACF-696 reports and the general ledger resulted from timing differences associated with subsequent cost allocations, accruals, and other adjustments. However, the issue identified during the audit was not the existence of timing differences, but that the reconciliation process did not adequately identify, explain, and support significant variances. Audit testing identified unreconciled variances totaling $491,119,535 between the ACF-696 reports and the general ledger. Although management indicated that adjustments were reported in subsequent quarters, documentation supporting a complete and accurate reconciliation was not available at the time of report preparation and submission. As a result, controls did not operate with sufficient precision to ensure reported amounts were accurate, complete, and supported by the Department's accounting records. Accordingly, we continue to conclude that the finding is valid as presented. We appreciate management's planned corrective actions to formalize the reconciliation process and strengthen oversight of ACF-696 reporting.
Reporting Federal Agency: U.S. Department of Health and Human ServicesFederal Program Title: Child Care and Development Block Grant/Child Care Mandatory and Matching Funds of the Child Care and Development Fund State Administering Department: California Department of Social Services (CDSS) ALN: 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2534CACCDD; October 1, 2024 – September 30, 2027 2534CACCDF; October 1, 2024 – September 30, 2027 2534CACCDM; October 1, 2024 – September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements Chapter I – Office of Management and Budget Government-Wide Guidance for Federal Financial Assistance Part 170 – Reporting Subaward and Executive Compensation Information Subpart A – General § 170.105 Applicability (a) Applicability in general. This part applies to a Federal agency’s Federal financial assistance as defined in § 170.300. This part applies to all recipients and subrecipients of Federal awards who meet the reporting requirements of paragraph (c) of this section, unless exempt under Federal statute or by paragraph (d) of this section. Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation (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 (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) 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. (c) Reporting of total compensation of subrecipient executives — (1) Applicability. Unless a first-tier subrecipient is exempt as provided in paragraph (d) of this appendix, the recipient must report the executive total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if: (i) The total Federal funding authorized to date under the subaward equals or exceeds $30,000; (ii) In the subrecipient's preceding fiscal year, the subrecipient received: (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal awards (and subawards) subject to the Transparency Act; and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal awards (and subawards) subject to the Transparency Act; and (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986 after receiving this subaward. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) (2) Reporting Requirements. Subrecipients must report to the recipient their executive total compensation described in paragraph (c)(1) of this appendix. The recipient is required to submit this information to the FFATA subaward reporting functionality (formerly FSRS and now reported through SAM.gov) at http://www.fsrs.gov no later than the end of the month following the month in which the subaward was made. As of March 2025, this functionality has been migrated to SAM.gov, which now serves as the system of record for FFATA subaward reporting. Condition: Audit procedures included a review of 60 FFATA subaward submissions for the CCDF Cluster reported in SAM.gov and a comparison of those submissions to underlying agreements and funding allocations applicable to FY 2024–25. Our testing identified that CDSS did not consistently perform or retain a documented evaluation of whether agreements constituted subawards or procurement contracts in accordance with 2 CFR § 200.331 prior to FFATA reporting. FFATA submissions did not align with the timing and structure of funding communicated through Child Care Bulletins, including allocation amendments and contract modifications, and all submissions tested contained errors in key data elements, including subrecipient identification and linkage to the prime award. In addition, CDSS included agreements in FFATA reporting without documented support that the substance of the relationship met the definition of a subaward, while agreements with subaward characteristics were not consistently identified and reported, resulting in reported amounts that did not consistently reflect underlying funding actions. Accordingly, controls over FFATA reporting were not performed with sufficient precision to ensure that agreements were appropriately classified and that reported information was complete and accurate in accordance with federal reporting requirements. Questioned costs: None Context: See “Condition.” Cause: The condition occurred because CDSS has not established an effective, centralized process to identify, evaluate, track, and report first-tier subawards subject to FFATA across its federal programs. CDSS did not maintain a complete reporting workflow that links funding actions, allocation amendments, agreement modifications, subrecipient classifications, and SAM.gov reporting deadlines. As a result, FFATA reporting relied on manual program-level processes that did not consistently ensure reportable subawards were identified, supported, reviewed, and submitted by the required deadline. Effect: Failure to timely and accurately report FFATA subaward information results in noncompliance with federal reporting requirements and reduces the transparency and reliability of publicly available federal spending data. Late, incomplete, or inaccurate reporting limits the ability of federal agencies, oversight bodies, and the public to determine how federal funds were passed through to subrecipients. Because similar FFATA deficiencies were identified across multiple CDSS-administered programs, there is an increased risk that reporting errors may continue or affect other federal programs unless CDSS implements a department-wide corrective action. Repeat finding: Yes – 2024-014 Recommendation: We recommend that CDSS revise its department-wide FFATA reporting procedures to address errors resulting from reliance on manual tracking, decentralized spreadsheets, and program-level processes that do not consistently capture funding actions, allocation amendments, agreement modifications, reporting deadlines, and SAM.gov submission status. Revised procedures should require program-specific review of each federal program’s funding structure and supporting documentation to determine whether agreements, allocations, amendments, or other funding actions are reportable subawards or procurement contracts, and whether new or updated FFATA reporting is required. CDSS should also require documented review before submission to verify that reported subrecipient information, award amounts, Assistance Listing numbers, prime award linkages, and reporting dates agree to underlying award documents, allocation letters, amendments, and agreements. These controls should help ensure FFATA submissions are accurate, timely, supported, and aligned with the unique funding structure of each CDSS-administered federal program. CDSS should consider utilizing a grant management solution to manage the full grant lifecycle more efficiently and ensure compliance with federal reporting requirements. The solution should support centralized tracking of awards, subawards, amendments, reporting deadlines, supporting documentation, review responsibilities, automated reminders, and submission status. This would reduce reliance on manual tracking and decentralized spreadsheets, improve accountability over responsible personnel, and strengthen CDSS’s ability to complete FFATA reporting accurately and timely. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Special Tests and Provisions Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant/Child Care Mandatory and Matching Funds of the Child Care and Development Fund State Administering Department: California Department of Social Services (CDSS) ALN: 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2434CACCDD; October 1, 2023 - September 30, 2026 2434CACCDF; October 1, 2023 - September 30, 2026 2434CACCDM; October 1, 2023 - September 30, 2025 2534CACCDD; October 1, 2024 - September 30, 2027 2534CACCDF; October 1, 2024 - September 30, 2027 2534CACCDM; October 1, 2024 - September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 42 – Public Welfare Subtitle A – Department of Health and Human Services Subchapter A – General Administration Part 98 – Child Care and Development Fund Subpart E – Program Operations (Child Care Services)—Lead Agency and Provider Requirements § 98.40 Compliance with applicable State and local regulatory requirements (a) Lead Agencies shall: (1) Certify that they have in effect licensing requirements applicable to child care services provided within the area served by the Lead Agency; (2) Describe in the Plan exemption(s) to licensing requirements, if any, for child care services for which assistance is provided, and a demonstration for how such exemption(s) do not endanger the health, safety, or development of children who receive services from such providers. Lead Agencies must provide the required description and demonstration for any exemptions based on: (i) Provider category, type, or setting; (ii) Length of day; (iii) Providers not subject to licensing because the number of children served falls below a Statedefined threshold; and (iv) Any other exemption to licensing requirements; and (3) Provide a detailed description in the Plan of the requirements under paragraph (a)(1) of this section and of how they are effectively enforced. § 98.41 Health and safety requirements (a) Each Lead Agency shall certify that there are in effect, within the State (or other area served by the Lead Agency), under State, local or tribal law, requirements (appropriate to provider setting and age of children served) that are designed, implemented, and enforced to protect the health and safety of children. Such requirements must be applicable to child care providers of services for which assistance is provided under this part. Such requirements, which are subject to monitoring pursuant to § 98.42, shall: (1) Include health and safety topics consisting of, at a minimum: (i) The prevention and control of infectious diseases (including immunizations); with respect to immunizations, the following provisions apply: (A) As part of their health and safety provisions in this area, Lead Agencies shall assure that children receiving services under the CCDF are age-appropriately immunized. Those health and safety provisions shall incorporate (by reference or otherwise) the latest recommendation for childhood immunizations of the respective State, territorial, or tribal public health agency. (B) Notwithstanding this paragraph (a)(1)(i), Lead Agencies may exempt: (1) Children who are cared for by relatives (defined as grandparents, great grandparents, siblings (if living in a separate residence), aunts, and uncles), provided there are no other unrelated children who are cared for in the same setting. (2) Children who receive care in their own homes, provided there are no other unrelated children who are cared for in the home. (3) Children whose parents object to immunization on religious grounds. (4) Children whose medical condition contraindicates immunization. (C) Lead Agencies shall establish a grace period that allows children experiencing homelessness and children in foster care to receive services under this part while providing their families (including foster families) a reasonable time to take any necessary action to comply with immunization and other health and safety requirements. (1) The length of such grace period shall be established in consultation with the State, Territorial or Tribal health agency. (2) Any payment for such child during the grace period shall not be considered an error or improper payment under subpart K of this part. (3) The Lead Agency may also, at its option, establish grace periods for other children who are not experiencing homelessness or in foster care. (4) Lead Agencies must coordinate with licensing agencies and other relevant State, Territorial, Tribal, and local agencies to provide referrals and support to help families of children receiving services during a grace period comply with immunization and other health and safety requirements; (ii) Prevention of sudden infant death syndrome and use of safe sleeping practices; (iii) Administration of medication, consistent with standards for parental consent; (iv) Prevention and response to emergencies due to food and allergic reactions; (v) Building and physical premises safety, including identification of and protection from hazards, bodies of water, and vehicular traffic; (vi) Prevention of shaken baby syndrome, abusive head trauma, and child maltreatment; (vii) Emergency preparedness and response planning for emergencies resulting from a natural disaster, or a man-caused event (such as violence at a child care facility), within the meaning of those terms under section 602(a)(1) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5195a(a)(1)) that shall include procedures for evacuation, relocation, shelter-in-place and lock down, staff and volunteer emergency preparedness training and practice drills, communication and reunification with families, continuity of operations, and accommodation of infants and toddlers, children with disabilities, and children with chronic medical conditions; (viii) Handling and storage of hazardous materials and the appropriate disposal of bio contaminants; (ix) Appropriate precautions in transporting children, if applicable; (x) Pediatric first aid and cardiopulmonary resuscitation; (xi) Recognition and reporting of child abuse and neglect, in accordance with the requirement in paragraph (e) of this section; and (xii) May include requirements relating to: (A) Nutrition (including age-appropriate feeding); (B) Access to physical activity; (C) Caring for children with special needs; or (D) Any other subject area determined by the Lead Agency to be necessary to promote child development or to protect children's health and safety. (2) Include minimum health and safety training on the topics above, as described in § 98.44. § 98.42 Enforcement of licensing and health and safety requirements (a) Each Lead Agency shall certify in the Plan that procedures are in effect to ensure that child care providers of services for which assistance is made available in accordance with this part, within the area served by the Lead Agency, comply with all applicable State, local, or tribal health and safety requirements, including those described in § 98.41. (b) Each Lead Agency shall certify in the Plan it has monitoring policies and practices applicable to all child care providers and facilities eligible to deliver services for which assistance is provided under this part. The Lead Agency shall: (1) Ensure individuals who are hired as licensing inspectors are qualified to inspect those child care providers and facilities and have received training in related health and safety requirements appropriate to provider setting and age of children served. Training shall include, but is not limited to, those requirements described in § 98.41, and all aspects of the State, Territory, or Tribe's licensure requirements; (2) Require inspections of child care providers and facilities, performed by licensing inspectors (or qualified inspectors designated by the Lead Agency), as specified below: (i) For licensed child care providers and facilities, (A) Not less than one pre-licensure inspection for compliance with health, safety, and fire standards, and (B) Not less than annually, an unannounced inspection for compliance with all child care licensing standards, which shall include an inspection for compliance with health and safety, (including, but not limited to, those requirements described in § 98.41) and fire standards (inspectors may inspect for compliance with all three standards at the same time); and (ii) For license-exempt child care providers and facilities that are eligible to provide services for which assistance is made available in accordance with this part, an annual inspection for compliance with health and safety (including, but not limited to, those requirements described in § 98.41), and fire standards; (iii) Coordinate, to the extent practicable, monitoring efforts with other Federal, State, and local agencies that conduct similar inspections. (iv) The Lead Agency may, at its option: (A) Use differential monitoring or a risk-based approach to design annual inspections, provided that the contents covered during each monitoring visit is representative of the full complement of health and safety requirements; (B) Develop alternate monitoring requirements for care provided in the child's home that are appropriate to the setting; and (3) Ensure the ratio of licensing inspectors to such child care providers and facilities is maintained at a level sufficient to enable the State, Territory, or Tribe to conduct effective inspections on a timely basis in accordance with the applicable Federal, State, Territory, Tribal, and local law; (4) Require child care providers to report to a designated State, Territorial, or Tribal entity any serious injuries or deaths of children occurring in child care. (c) For the purposes of this section and § 98.41, Lead Agencies may exclude grandparents, great grandparents, siblings (if such providers live in a separate residence), aunts, or uncles, from the term “child care providers.” If the Lead Agency chooses to exclude these providers, the Lead Agency shall provide a description and justification in the CCDF Plan, pursuant to § 98.16(l), of requirements, if any, that apply to these providers. Condition: The CDSS has not established health and safety monitoring procedures to ensure licensed-exempt providers serving children who receive subsidies comply with all applicable health and safety requirements. Review of oversight results issued by the grantor agency identified deficiencies in multiple health and safety areas for license-exempt providers. Questioned costs: None Context: See “Condition.” Cause: The condition is due to delays in finalizing and implementing a comprehensive health and safety monitoring process for license-exempt providers. Although CDSS has initiated efforts to develop monitoring procedures for license-exempt contractors, full implementation is dependent on statutory and budgetary actions, which have delayed the Department’s ability to establish, implement, and enforce required health and safety standards, training, and inspection requirements across all applicable provider types. As a result, controls were not fully designed or operating to ensure consistent compliance with CCDF health and safety requirements during the audit period. Effect: Failure to implement and enforce required health and safety standards increases the risk that children receiving CCDF-funded services are in environments that do not meet minimum Federal health and safety requirements. In addition, the lack of consistent monitoring and enforcement reduces the Department’s ability to detect and remediate noncompliance, resulting in program-wide noncompliance and increased risk of Federal sanctions or funding implications. Repeat finding: Yes – 2024-016 Recommendation: We recommend that CDSS strengthen internal controls over health and safety compliance by establishing and fully implementing comprehensive health and safety standards across all applicable provider types, including license-exempt providers. The Department should also ensure that required pre-service and ongoing training requirements are clearly defined, implemented, and tracked for all required health and safety topics. In addition, CDSS should enhance its monitoring and inspection processes to ensure required annual inspections, including unannounced inspections where applicable, are performed timely and consistently documented. These actions will help ensure that providers receiving CCDF funds comply with Federal health and safety requirements, improve the Department’s ability to identify and correct noncompliance, and strengthen overall program integrity and child safety. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Special Tests and Provisions Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant/Child Care Mandatory and Matching Funds of the Child Care and Development Fund State Administering Department: California Department of Social Services (CDSS) ALN: 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2434CACCDD; October 1, 2023 - September 30, 2026 2434CACCDF; October 1, 2023 - September 30, 2026 2434CACCDM; October 1, 2023 - September 30, 2025 2534CACCDD; October 1, 2024 - September 30, 2027 2534CACCDF; October 1, 2024 - September 30, 2027 2534CACCDM; October 1, 2024 - September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.329 Monitoring and reporting program performance (a) Monitoring by the recipient and subrecipient The recipient and subrecipient are responsible for the oversight of the Federal award. The recipient and subrecipient must monitor their activities under Federal awards to ensure they are compliant with all requirements and meeting performance expectations. Monitoring by the recipient and subrecipient must cover each program, function, or activity. See also § 200.332. Title 45 – Public Welfare Subtitle A – Department of Health and Human Services Subchapter A – General Administration Part 98 – Child Care and Development Fund Subpart B – General Application Procedures § 98.11 – Administration under contracts and agreements Lead Agencies have broad authority to administer and operate the CCDF program through other governmental, nongovernmental, or public or private local agencies; however, the Lead Agency must retain overall responsibility for the administration of the program and ensure that administrative and implementation responsibilities undertaken by agencies other than the Lead Agency are governed by written agreements specifying the mutual roles and responsibilities of the Lead Agency and other agencies in meeting CCDF requirements. The approved FFY 2025–2027 CCDF State Plan identifies CDSS as the Lead Agency and states that activities performed by agencies other than CDSS are governed through written agreements, including contracts and grant award notifications, that include required elements such as tasks to be performed, schedules for completing tasks, budgets, and performance measures. The State Plan further describes CDSS’s monitoring process for contractors, including standard review instruments, corrective action follow-up, fiscal and program reporting, and contractor review requirements. Condition: Audit procedures included testing a sample of 60 CCDF contractors to determine whether CDSS performed on-site monitoring visits in accordance with the contractor review cycle specified in the approved State Plan and related monitoring procedures. Of the 60 contractors tested, 2 contractors did not receive an on-site monitoring visit within the required review period. Specifically, the contractors had not received an on-site visit within four years, although the State Plan and related monitoring procedures require contractor reviews to be performed within a three-year cycle. As a result, CDSS did not consistently perform required monitoring procedures within the timeframe established for oversight of CCDF contractors. Questioned costs: None Context: See “Condition.” Cause: CDSS did not maintain internal controls that operated with sufficient precision to ensure all CCDF contractors were scheduled for and received required on-site monitoring visits within the established review cycle. Specifically, monitoring controls were not designed or performed at a level sufficient to identify overdue contractor reviews, track the status of required visits, and ensure timely completion of on-site monitoring for all applicable contractors. Effect: Failure to perform timely on-site monitoring visits reduces CDSS’s ability to determine whether contractors are operating in accordance with written agreements, State Plan requirements, and applicable CCDF program requirements. Untimely monitoring increases the risk that contractor noncompliance, performance deficiencies, or unsupported program activities are not identified and corrected promptly, which may affect CDSS’s ability to retain effective oversight and overall responsibility for the CCDF program. Repeat finding: No Recommendation: We recommend that CDSS strengthen internal controls over CCDF contractor monitoring by implementing procedures to ensure all contractors are scheduled for and receive required on-site monitoring visits within the review cycle established in the approved State Plan and related monitoring procedures. These procedures should include maintaining a complete monitoring schedule, tracking the date of each contractor’s last review, identifying upcoming and overdue reviews, and requiring documented supervisory review to ensure monitoring visits are completed timely. CDSS should also establish a process to periodically reconcile the monitoring schedule to the population of active CCDF contractors and promptly follow up on overdue reviews. These controls should help ensure CDSS performs contractor oversight consistently, documents compliance with written agreement monitoring requirements, and retains effective responsibility for CCDF administration. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. Response to views of responsible officials: We acknowledge CDSS's response regarding resource constraints, risk-based prioritization, and its interpretation of the "as resources permit" language in Title 5, California Code of Regulations, Section 18023(b). However, the approved State Plan and related monitoring procedures in effect during the audit period established a three-year review cycle for contractor monitoring. Audit testing identified that 2 of 60 CCDF contractors did not receive an on-site monitoring visit for more than four years. While CDSS employed a risk-based approach to prioritize monitoring activities, the required reviews were not completed within the established review cycle for the contractors identified in our testing. Accordingly, the finding is based on CDSS's failure to consistently perform monitoring reviews within the established review cycle and the lack of controls to ensure overdue reviews were identified, tracked, and completed timely. Therefore, we continue to conclude that the finding is valid as presented.
Reporting Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant State Administering Department: California Department of Social Services (CDSS) ALN: 93.667 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2501CASOSR; October 1, 2024 - September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements Chapter I – Office of Management and Budget Government-Wide Guidance for Federal Financial Assistance Part 170 – Reporting Subaward and Executive Compensation Information Subpart A – General § 170.105 Applicability (a) Applicability in general. This part applies to a Federal agency’s Federal financial assistance as defined in § 170.300. This part applies to all recipients and subrecipients of Federal awards who meet the reporting requirements of paragraph (c) of this section, unless exempt under Federal statute or by paragraph (d) of this section. Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation (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 (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) 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. (c) Reporting of total compensation of subrecipient executives — (1) Applicability. Unless a first-tier subrecipient is exempt as provided in paragraph (d) of this appendix, the recipient must report the executive total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if: (i) The total Federal funding authorized to date under the subaward equals or exceeds $30,000; (ii) In the subrecipient's preceding fiscal year, the subrecipient received: (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal awards (and subawards) subject to the Transparency Act; and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal awards (and subawards) subject to the Transparency Act; and (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986 after receiving this subaward. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) (2) Reporting Requirements. Subrecipients must report to the recipient their executive total compensation described in paragraph (c)(1) of this appendix. The recipient is required to submit this information to the FFATA subaward reporting functionality (formerly FSRS and now reported through SAM.gov) at http://www.fsrs.gov no later than the end of the month following the month in which the subaward was made. As of March 2025, this functionality has been migrated to SAM.gov, which now serves as the system of record for FFATA subaward reporting. Condition: Audit procedures included a review of FFATA subaward submissions for the Social Services Block Grant reported in SAM.gov and a comparison of those submissions to funding actions applicable to FY 2024–25. Our testing identified that no subawards were reported within the required timeframe. Questioned costs: None Context: See “Condition.” Cause: The condition occurred because CDSS has not established an effective, centralized process to identify, evaluate, track, and report first-tier subawards subject to FFATA across its federal programs. CDSS did not maintain a complete reporting workflow that links funding actions, allocation amendments, agreement modifications, subrecipient classifications, and SAM.gov reporting deadlines. As a result, FFATA reporting relied on manual program-level processes that did not consistently ensure reportable subawards were identified, supported, reviewed, and submitted by the required deadline. Effect: Failure to timely and accurately report FFATA subaward information results in noncompliance with federal reporting requirements and reduces the transparency and reliability of publicly available federal spending data. Late, incomplete, or inaccurate reporting limits the ability of federal agencies, oversight bodies, and the public to determine how federal funds were passed through to subrecipients. Because similar FFATA deficiencies were identified across multiple CDSS-administered programs, there is an increased risk that reporting errors may continue or affect other federal programs unless CDSS implements a department-wide corrective action. Repeat finding: No Recommendation: We recommend that CDSS revise its department-wide FFATA reporting procedures to address errors resulting from reliance on manual tracking, decentralized spreadsheets, and program-level processes that do not consistently capture funding actions, allocation amendments, agreement modifications, reporting deadlines, and SAM.gov submission status. Revised procedures should require program-specific review of each federal program’s funding structure and supporting documentation to determine whether agreements, allocations, amendments, or other funding actions are reportable subawards or procurement contracts, and whether new or updated FFATA reporting is required. CDSS should also require documented review before submission to verify that reported subrecipient information, award amounts, Assistance Listing numbers, prime award linkages, and reporting dates agree to underlying award documents, allocation letters, amendments, and agreements. These controls should help ensure FFATA submissions are accurate, timely, supported, and aligned with the unique funding structure of each CDSS-administered federal program. CDSS should consider utilizing a grant management solution to manage the full grant lifecycle more efficiently and ensure compliance with federal reporting requirements. The solution should support centralized tracking of awards, subawards, amendments, reporting deadlines, supporting documentation, review responsibilities, automated reminders, and submission status. This would reduce reliance on manual tracking and decentralized spreadsheets, improve accountability over responsible personnel, and strengthen CDSS’s ability to complete FFATA reporting accurately and timely. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Eligibility Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Medicaid Cluster State Administering Department: Department of Health Care Services (DHCS) ALN: 93.775, 93.777, 93.778 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2405CA5MAP; July 1, 2024 – September 30, 2024 2405CA5ADM; October 1, 2024 – December 31, 2024 2505CA5MAP; January 1, 2025 – March 31, 2025 2505CA5ADM; April 1, 2025 – June 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample. Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 42 CFR 435.912, state Medicaid agencies must establish and adhere to timeliness and performance standards for determining and redetermining eligibility. These standards are intended to ensure that eligibility decisions are made promptly and accurately, and that benefits are not continued beyond the period of eligibility. Condition: Audit procedures included a review of 60 Medicaid beneficiaries associated with currently eligible participants to evaluate compliance with eligibility requirements, including the timeliness of redeterminations and the propriety of benefits issued. Based on our testing, instances of noncompliance were identified related to both the timeliness of eligibility redeterminations and the appropriateness of benefits paid: - For eleven of the 60 beneficiaries tested, required eligibility redeterminations were not completed within the prescribed timeframes. - For three of the 60 beneficiaries tested, benefits were provided during periods in which the individuals did not meet eligibility requirements. These exceptions indicate that controls over the monitoring and completion of required redeterminations, as well as controls to ensure benefits are issued only to eligible individuals, were not operating effectively. Questioned costs: $18,468 Context: See “Condition.” Cause: The exceptions identified were due to internal controls over the eligibility determination and redetermination processes not operating with sufficient precision to ensure consistent compliance with program requirements. Specifically, controls were not performing at a level of precision necessary to consistently enforce DHCS guidance, ensure timely completion of required verification procedures, and detect and correct errors through supervisory review. As a result, inaccuracies in eligibility determinations were not consistently prevented or identified, contributing to improper enrollment of ineligible beneficiaries. Effect: Failure to properly determine eligibility and terminate benefits in the eligibility system may result in individuals receiving improper benefit payments and noncompliance with grant award terms and conditions. Repeat finding: Yes – 2024-011 Recommendation: DHCS should enhance its procedures for monitoring and resolving MEDS alerts, ensuring timely review and action on system-generated discrepancies. Additionally, staff should receive ongoing training on the importance of accurately updating eligibility requirements in CalSAWS to ensure the prevention of inappropriate continuation of benefits. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Special Tests and Provisions Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Medicaid Cluster State Administering Department: California Department of Public Health (CDPH) ALN: 93.775, 93.777, 93.778 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2405CA5MAP; July 1, 2024 – September 30, 2024 2405CA5ADM; October 1, 2024 – December 31, 2024 2505CA5MAP; January 1, 2025 – March 31, 2025 2505CA5ADM; April 1, 2025 – June 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, per Centers for Medicare and Medicaid Services (CMS) guidance issued in “Admin Info: 25-03- All” letter dated October 23, 2024, Surveys for Skilled Nursing Facilitates (SNF) and Intermediate Care Facilities (ICF) surveys should be conducted in the following timeframes: - Nursing home recertification health surveys are conducted within the maximum time interval of 15.9 months. - Active Intermediate care facility for individuals with intellectual disabilities (ICF/IID) that have been surveyed within the required maximum interval of 15.9 months. Condition: During our audit procedures, we reviewed sixty surveys related to provider recertification under the Medicaid program. We identified that thirty Skilled Nursing Facilities and seventeen Intermediate Care Facilities were not conducted in the required timeframe. Questioned costs: None Context: See “Condition.” Cause: Resource and staffing constraints limited CDPH’s capacity, as the survey agency supporting DHCS’s Medicaid provider certification process, to conduct all required recertification surveys within federally mandated timeframes. Consequently, surveys were prioritized based on risk and need, resulting in some SNF and ICF/IID surveys not being completed within the required 15.9-month interval. Effect: Failure to conduct required recertification surveys timely may result in noncompliance with federal Medicaid provider health and safety requirements and reduces assurance that participating facilities continue to meet standards for Medicaid participation. Repeat finding: Yes – 2024-012 Recommendation: DHCS, in coordination with CDPH, should strengthen oversight controls to ensure timely completion of SNF and ICF/IID surveys. Procedures should include tracking required survey due dates, monitoring surveys approaching or exceeding the 15.9-month interval, documenting prioritization decisions when capacity constraints exist, and performing supervisory review to verify that overdue surveys are identified and remediated timely. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Activities Allowed and Unallowed Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Children’s Health Insurance Program (CHIP) (Not a Major Program) State Administering Department: Department of Health Care Services (DHCS) ALN: 93.767 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2305CA3002; October 1, 2022- September 30, 2024 2405CA5021; October 1, 2023- September 30, 2025 2505CA5021; October 1, 2024- September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Audit procedures included a review of 40 CHIP beneficiaries associated with currently eligible participants. Of the 40 beneficiaries tested, two were assigned an obsolete aid code. While the underlying participant eligibility appeared to meet program criteria, the aid code is a key data element used in determining reimbursement rates. As a result, payments for these beneficiaries were calculated using an incorrect rate, leading to improper payment amounts. Questioned costs: $14,910,485 (known costs $1,850) Context: See “Condition.” Cause: The control designed to detect and correct invalid or obsolete aid codes did not operate at a sufficient level of precision to identify these errors. Specifically, an automated system interface between CalSAWS and MEDS does not consistently update or prevent the use of discontinued aid codes. Effect: Use of obsolete aid codes may result in reimbursement calculations using incorrect rates, leading to improper payment amounts and noncompliance with federal award terms and conditions. Because aid codes drive reimbursement rate determinations, control deficiencies over obsolete or invalid aid codes increase the risk that expenditures are not calculated accurately or supported by current program requirements. Repeat finding: Yes – 2024-010 Recommendation: DHCS should strengthen controls over aid code maintenance and validation to ensure obsolete or invalid aid codes are not used in reimbursement calculations. Procedures should include periodic reviews of aid code tables, reconciliation of active aid codes between CalSAWS and MEDS, monitoring of system interface exceptions, and documented supervisory review to identify and correct obsolete aid codes before payments are calculated. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Eligibility Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Children’s Health Insurance Program (CHIP) (Not a Major Program) State Administering Department: Department of Health Care Services (DHCS) ALN: 93.767 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2305CA3002; October 1, 2022- September 30, 2024 2405CA5021; October 1, 2023- September 30, 2025 2505CA5021; October 1, 2024- September 30, 2026 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally: - 42 CFR §435.916(a)(1) requires annual redeterminations every 12 months. - 42 CFR §457.320 and §457.340 require accurate and timely eligibility determinations for CHIP. - 42 CFR §435.912(c)(3) requires processing of nondisability applications within 45 days. Condition: Audit procedures included a review of 40 CHIP beneficiaries associated with current eligible participants. Of the 40 participants reviewed: - For eight of the 40 beneficiaries tested, required eligibility redeterminations were not completed within the prescribed timeframes. - Three beneficiaries received benefits despite not meeting eligibility requirements during the period the benefits were provided. - One beneficiary had an eligibility determination that exceeded the required 45-day processing timeframe. Questioned costs: $2,827 Context: See “Condition.” Cause: The exceptions identified were due to internal controls over the eligibility determination and redetermination processes not operating with sufficient precision to ensure consistent compliance with program requirements. Specifically, controls were not performing at a level of precision necessary to consistently enforce DHCS guidance, ensure timely completion of required verification procedures, and detect and correct errors through supervisory review. As a result, inaccuracies in eligibility determinations were not consistently prevented or identified, contributing to improper enrollment of ineligible beneficiaries. Effect: Failure to properly determine eligibility and terminate benefits in the eligibility system may result in individuals receiving improper benefit payments and noncompliance with grant award terms and conditions. Repeat finding: No Recommendation: DHCS should strengthen controls over eligibility determinations and redeterminations to ensure applications, redeterminations, and case updates are completed within required timeframes and that benefits are discontinued when eligibility requirements are no longer met. Procedures should include monitoring overdue redeterminations, resolving MEDS and CalSAWS alerts timely, documenting supervisory review of exception reports, and providing refresher training on timely eligibility processing and case closure requirements. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Period of Performance Federal Agency: Federal Emergency Management Agency Federal Program Title: Disaster Grants - Public Assistance State Administering Department: Governor’s Office of Emergency Services ALN: 97.036 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 4856DRCAP00000001; January 7, 2025 – January 9, 2029 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, 2 CFR 200.77 defines the period of performance as the time during which the non- Federal entity may incur new obligations to carry out the work authorized under the Federal award and requires that the Federal awarding agency or pass-through entity include the start and end dates of the period of performance in the Federal award. Effective internal controls should ensure that compliance with applicable requirements is achieved throughout the defined period of performance, beginning on the award start date. Condition: For awards with period of performance start dates occurring during the fiscal year, audit procedures included testing transactions recorded in the general ledger during the initial month of the award. We tested a sample of seven transactions totaling $23,576. Our testing identified one transaction, totaling $9,852, for which costs were incurred prior to the beginning of the period of performance. Specifically, the award period began on January 7, 2025; however, the associated costs were incurred between January 3 and January 6, 2025. Questioned costs: None Context: See “Condition.” Cause: Controls over the review of expenditures at the start of the period of performance were not operating with sufficient precision to ensure that only allowable costs incurred on or after the award start date were charged to the appropriate Federal award. Specifically, management did not consistently apply procedures to verify that expenditures were recorded to the correct grant and within the applicable period of performance, resulting in the misclassification of pre-award costs to the grant. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. Repeat finding: No Recommendation: The Department should strengthen controls over grant accounting by implementing procedures to ensure that expenditures are both charged to the correct grant and incurred within the applicable period of performance. This should include establishing controls to verify grant coding and transaction dates prior to posting or reimbursement, as well as enhancing supervisory review processes to detect and prevent misclassification of expenditures and the recording of unallowable pre-award costs. Additionally, the Department should provide training to personnel responsible for grant accounting on proper grant coding and period-ofperformance requirements. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reporting Federal Agency: Federal Emergency Management Agency Federal Program Title: Disaster Grants - Public Assistance State Administering Department: Governor’s Office of Emergency Services ALN: 97.036 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 4407DRCAP00000001; November 12, 2018 – September 30, 2022 4431DRCAP00000001; May 1, 2019 – September 30, 2022 4482DRCAP00000001; January 20, 2020 – September 30, 2025 4558DRCAP00000001; August 24, 2021 – September 30, 2025 4683DRCAP00000001; December 27, 2022 – September 30, 2025 4699DRCAP00000001; April 3, 2023 – September 30, 2025 4750DRCAP00000001; August 19, 2023 – September 30, 2025 4769DRCAP00000001; January 31, 2024 – September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). § 200.302 – Financial management (b) The recipient's and subrecipient's financial management system must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements Chapter I – Office of Management and Budget Government-Wide Guidance for Federal Financial Assistance Part 170 – Reporting Subaward and Executive Compensation Information Subpart A – General § 170.105 Applicability (a) Applicability in general. This part applies to a Federal agency’s Federal financial assistance as defined in § 170.300. This part applies to all recipients and subrecipients of Federal awards who meet the reporting requirements of paragraph (c) of this section, unless exempt under Federal statute or by paragraph (d) of this section. Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation (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 (FFATA) subaward reporting functionality (formerly FSRS and now reported through SAM.gov) 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. (c) Reporting of total compensation of subrecipient executives — (1) Applicability. Unless a first-tier subrecipient is exempt as provided in paragraph (d) of this appendix, the recipient must report the executive total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if: (i) The total Federal funding authorized to date under the subaward equals or exceeds $30,000; (ii) In the subrecipient's preceding fiscal year, the subrecipient received: (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal awards (and subawards) subject to the Transparency Act; and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal awards (and subawards) subject to the Transparency Act; and (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986 after receiving this subaward. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) (2) Reporting Requirements. Subrecipients must report to the recipient their executive total compensation described in paragraph (c)(1) of this appendix. The recipient is required to submit this information to the FFATA subaward reporting functionality (formerly FSRS and now reported through SAM.gov) at http://www.fsrs.gov no later than the end of the month following the month in which the subaward was made. As of March 2025, this functionality has been migrated to SAM.gov, which now serves as the system of record for FFATA subaward reporting. Condition: Audit procedures included testing 60 FFATA reporting submissions related to subrecipients to evaluate compliance with federal reporting requirements and the design and implementation of internal controls over the FFATA reporting process. Our testing identified that FFATA reports for 36 of the 60 subrecipients were not submitted timely in accordance with federal requirements. While the reports were ultimately complete and accurate, controls over the reporting process were not performed with sufficient precision to ensure timely submission. Questioned costs: None Context: See “Condition.” Cause: During the fiscal year, the Department revised its procedures for performing FFATA reporting; however, the updated procedures and related controls were not consistently implemented across all subrecipient reporting activities. As a result, certain reports were processed outside of the revised control framework, contributing to delays in timely submission. Effect: The lack of established procedures and internal controls for FFATA reporting resulted in noncompliance, with 36 out of 60 subrecipients not reported timely as required. Repeat finding: Yes – 2024-020 Recommendation: The Department should strengthen controls over FFATA reporting by ensuring that revised procedures are fully implemented and consistently applied to all subrecipient reporting activities. This should include establishing clear protocols to identify all reports subject to FFATA requirements, monitoring compliance with reporting deadlines, and performing periodic reviews to verify that controls are operating with sufficient precision to ensure timely submission. Additionally, the Department should provide training and communication to relevant personnel on updated procedures and implement supervisory review controls to detect and remediate untimely filings. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Special Tests and Provisions Federal Agency: Federal Emergency Management Agency Federal Program Title: Disaster Grants - Public Assistance State Administering Department: Governor’s Office of Emergency Services ALN: 97.036 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 4699DRCAP00000001; April 3, 2023 – September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 44 – Emergency Management and Assistance, §206.205 (Payment of Claims), requires that for large projects, the subrecipient must account for actual eligible costs and certify that: - Costs were incurred for eligible work - Work was completed in accordance with the approved scope - The project complied with the FEMA-State Agreement and grant conditions - Payments were made in accordance with applicable requirements For small projects, the subrecipient must certify completion of the approved scope of work through a Small Project Completion Certification. Additionally, 2 CFR §200.303 (Internal Controls) requires the entity to establish and maintain effective internal controls to ensure compliance with Federal statutes, regulations, and grant terms. Condition: During audit procedures, we tested a sample of 14 large FEMA Public Assistance projects. We identified one instance in which a project was incorrectly classified as a small project and was paid without the required large project reimbursement request and supporting validation. Questioned costs: None Context: See “Condition.” Cause: The error resulted from the incorrect application of FEMA’s large project threshold, as the control over project classification did not operate with sufficient precision to ensure the appropriate threshold was applied. Specifically, the project, totaling $1,044,653.84, exceeded the applicable 2023 large project threshold of $1,000,000; however, it was evaluated using the 2025 threshold of $1,062,900 based on the obligation date. Due to the lack of precision in the control, this error was not identified during review, resulting in the improper classification and processing of the project. Effect: A lack of precision of the controls to properly classify and process the project in accordance with FEMA requirements may result in noncompliance with federal grant provisions and inadequate oversight of project costs and reimbursements. Repeat finding: No Recommendation: The Department should strengthen its controls and procedures to ensure projects are classified using the correct FEMA large project thresholds. This should include implementing a review control to verify threshold applicability based on the appropriate timing criteria and ensuring that all required documentation, including reimbursement requests and validations, is completed prior to payment. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.