Audit 411436

Finding No. 2025-004 Federal Agency: U.S. Department of Health Services (DHS) Federal Program Name: All DHS Assistance Listing Number: All DHS Pass Through Entity: Wisconsin Department of Health and Human Services Federal Award Notification Number and Year: All DHS Award Period: January 1, 2025 – December 31, 2025 Compliance Requirement Affected: Reporting Type of Finding: Material Weakness in Internal Control Over Compliance Criteria or Specific Requirement: Allowable Costs/Cost Principles - CFR 200.430 Compensation - Personal Services requires that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. This documentation must be incorporated into the official records of the recipient. The support must include documentation for the distribution of employee's salary or wages amount for specific activities or cost objectives when the employee works on more than one federal award and when employees work on indirect/direct cost activities and unallowable/direct/indirect cost activities. Condition: During our testing, we noted employee payroll costs are not uniformly allocated to programs, with some allocations not in balance, and other allocations not recorded on the general ledger at all. Also, some payroll costs are directly adjusted out of payroll accounts into programs that have one singular account, making reconciliation difficult. In addition, portions of fiscal and administrative employee payroll costs are not allocated at all. Questioned Costs: None Context: The Human Services Department (the Department) has sixteen cost centers where payroll costs are directly charged through the County's biweekly payroll process, along with payroll allocation accounts in six other cost centers, for a total of twenty-two cost centers. The Department administers more than 40 programs that professional program staff work in. There are also approximately a dozen programs that consist of external vendor payments; these typically have fiscal and administration staff completing clerical, billing, accounting, reporting and contract management tasks. Program counts fluctuate during the year based on funding and grant award periods. Cause: High levels of employee turnover in the Fiscal Division of the Department, coupled with constant changes in funding, programs and regulations have resulted in a piecemeal cost allocation process for payroll costs that varies from program to program. Also, the County as a whole has not updated its accounting system and overall account structure for an extended period of time. Effect: The auditor noted no instances of noncompliance; however, the lack of uniform allocation and uniform account structure could result in the Department over allocation of payroll costs to a grant program. Recommendation: The County should conduct a review of its overall account structure, and the Finance Department should coordinate and assist the Human Services Department in the implementation of a new, uniform account structure. The Human Services Department should develop a uniform payroll allocation process that will allocate all employee costs to each program based on actual hours worked, regardless of funding availability. Views of Responsible Officials: There is no disagreement with the finding.

Finding No. 2025-005 Federal Agency: U.S Department of Health Services Federal Program Name: Medicaid Cluster Assistance Listing Number: 93.778 Pass Through Entity: Wisconsin Department of Health Services Federal Award Notification Number and Year: All – 2025 Award Period: January 1, 2025 – December 31, 2025 Compliance Requirement Affected: Reporting Type of Finding: Material Weakness in Internal Control Over Compliance Criteria or Specific Requirement: Allowable Costs/Cost Principles - CFR 200.403 Factors Affecting Allowability Of Costs requires that reported costs not be included as a cost of any other federally financed program. Condition: During testing of the Wisconsin Children’s Long-Term Support Medicaid Waiver program, (CLTS), a material difference was noted between the total of the monthly amounts submitted as administrative costs and total amount submitted on the annual grant reconciliation report. The program expectation is that the total of the monthly amounts should be comparable to the amount submitted on the annual reconciliation. Questioned Costs: None Context: The Wisconsin Department of Health Services (WI DHS) CLTS program allows counties to claim a self-calculated administrative cost each month for reimbursement, with the final payment early the following year. A separate annual report that requires a higher level of detail is due in early April of the following year, including each employee's payroll costs, hours worked both in and out of the program, paid time off and details of any additional administrative costs reported. WI DHS reconciles the submitted costs on the annual report with the amounts already billed to the State CLTS Medicaid program and considers any unreimbursed amounts to be administrative costs. Those costs are compared to the amounts the County reported and has already been reimbursed. WI DHS either pays or takes back the difference. Cause: The County submitted $458,639 in monthly administrative costs for reimbursement which they had already recouped from the Medicaid billing program; they received payments of $236,429 from those submitted costs based on contract limitations. The grand total submitted for 2025 administrative reimbursement was $571,458; the County was ultimately entitled to $112,820 after the annual reconciliation report was reviewed and approved by WI DHS. The County received reimbursements totaling $216,433 through November 2025, with an additional $132,816 in reimbursements received through May 2026. WI DHS recouped the $236,429 overpayment in June 2026. Effect: The County submitted administrative costs for reimbursement under WI DHS CLTS program which were previously recouped from the Medicaid billing program. As a result, the County had to pay back $236,429 to WI DHS for this duplicate reporting. Recommendation: The Human Services Department (the Department) should develop a uniform payroll allocation process that will allocate all employee costs to each program based on actual hours worked, including fiscal and administrative employees. They should also implement a uniform account structure that includes the objects necessary to track program costs, so they can be used to accurately calculate and report costs in accordance with all program requirements. In addition, the Department should redesign its accounting, reporting and reconciliation structure to include all programs and prevents double reporting from happening. Views of Responsible Officials: There is no disagreement with the finding.

Finding No. 2025-007 State Agencies: All Wisconsin Department of Health Services (WDHS) and Wisconsin Department of Children and Families (WDCF) State Identification Number: All WDHS and WDCF Pass Through Entity: WDHS and WDCF State Award Notification Number and Year: 2025 Award Period: January 1, 2025 – December 31, 2025 Compliance Requirement: Procurement Type of Finding: Material Weakness in Internal Control Over Compliance Criteria or Specific Requirement: Wisconsin Department of Health Services (WI DHS) compliance requirement 2.6.2.2 and Wisconsin Department of Children and Families (WI DCF) compliance requirement 2.4 requires entities to monitor payments for purchase of care and services to ensure total payment does not exceed the contract’s specified and approved amount. Condition: The Human Services Department contracts with providers to provide client care and services. The Human Services Department has established procedures to monitor the spending on contracts; however, during our testing several providers received disbursements greater than contracted amount and amendments were not made. Test results for a sample of 44 contracts resulted in 11 instances where actual disbursements exceeded the approved contract amount. Questioned Costs: None Context: While performing compliance testing, it was noted the Human Services Department did not follow WI DHS and WI DCF requirements to ensure compliance with provider audits by reviewing the approved contracted amounts and ensuring appropriate amendments were in place to ensure actual disbursements did not exceed contracted and approved amounts. Cause: Due to staff turnover in the current year, the Human Services Department did not consistently review contracted amounts and make appropriate amendments as necessary and therefore during our testing we identified actual disbursements were made to vendors in excess of the approved contracted amounts. Effect: The Human Services Department did not effective monitor contract compliance, which could result in questioned costs or noncompliance with grant requirements. Recommendation: The Human Services Department should review procedures established for contract review and identify the procedures responsible for monitoring spending on provider contracts. Views of Responsible Officials: There is no disagreement with the finding.