2025-001 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: 2024-002 Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 252MN101S2514; 2025 Pass-Through Agency: Minnesota Department of Human Services and Minnesota Department of Children, Youth, and Families Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: The following exceptions were noted in the sample of 41 expenditures tested: • One claim included activity that was allocated on an incorrect full-time equivalent (FTE) split. • One claim was paid to an incorrect vendor and the correct vendor in the same period. Both claims were included in the quarterly report. • One claim was included on the incorrect report. The items noted above are included in the Child Support Services Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2025-004) and the Grants to States for Medicaid Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting finding (2025-005). Questioned Costs: $1,595; known questioned costs were determined based on exceptions noted from a sample of transactions tested. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities and costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are $661,852, consisting of 2,729 transactions. A sample of 40 expenditures was selected for testing and was then expanded to include one State Administrative Matching Grants for the Supplemental Nutrition Assistance Program expenditure included in Child Support Services testing. The sample of 41 transactions totaled $116,616. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits, and subsequently expanded. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly. View of Responsible Official: Acknowledge
2025-002 Procurement Policy Prior Year Finding Number: N/A Year of Finding Origination: 2025 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 252MN101S2514; 2025 Pass-Through Agency: Minnesota Department of Human Services and Minnesota Department of Children, Youth, and Families Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations § 200.318 states that the non-federal entity must use its own documented procurement procedures which reflect applicable state, local, and tribal laws and regulations, provided that the procurements conform with applicable federal law and the standards identified in this regulation. Condition: The Health and Human Services has written procurement policies; however, these policies do not include the required components in accordance with Title 2 U.S. Code of Federal Regulations § 200.318. Questioned Costs: None. Context: This issue was discovered during the audit of the major federal program; however, it impacts federal programs entity-wide. Written policies that reflect the specific components of federal regulations improve controls to ensure compliance with federal award requirements. Effect: Written policies and procedures that are not updated to reflect the federal procurement requirements could increase the risk of noncompliance with federal program requirements. Cause: The Health and Human Services modified the procurement policy during the year resulting in language related to several procurement requirements being excluded due to an oversight. Recommendation: We recommend the Health and Human Services include the specific components of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards requirements in its written procurement policies and procedures. View of Responsible Official: Concur
2025-003 Procurement, Suspension, and Debarment Prior Year Finding Number: 2024-003 Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 252MN101S2514; 2025 Pass-Through Agency: Minnesota Department of Human Services and Minnesota Department of Children, Youth, and Families Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations § 200.318(i) states that the Health and Human Services must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Additionally, the Health and Human Services must follow further federal guidance over full and open competition as provided in Title 2 U.S. Code of Federal Regulations § 200.319 and perform a cost or price analysis as provided in Title 2 U.S. Code of Federal Regulations § 200.324. Condition: The following exceptions were noted in the procurement testing: • For three of the small purchases tested, the Health and Human Services did not have documentation of price or rate quotations obtained from an adequate number of qualified sources detailing the history of procurement or documentation of full and open competition. • For two of the micro-purchase procurements tested, the Health and Human Services did not document how purchases are distributed among qualified suppliers, as practical. • For the one transaction over the simplified acquisition threshold tested, no documentation was maintained detailing the history of the procurement, demonstrating full and open competition, or that a cost or price analysis was performed. Questioned Costs: $320,983; known questioned costs were determined based on exceptions noted from a sample of transactions. Context: The thresholds used for procurement testing were based on the Health and Human Services’ policy for simplified acquisition threshold (over $150,000), small purchases ($3,000 to $150,000), and micro-purchases ($3,000 or less) through November 18, 2025, and after November 18, 2025, then the thresholds used for procurement testing were small purchases ($10,000 to $100,000) and micro-purchases ($10,000 or less). The population consisted of one procurement over the simplified acquisition threshold, 32 small purchases, and 395 micro-purchases. The sample was one transaction over the simplified acquisition threshold, six small purchases, and five micro-purchases. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: It cannot be determined that the contracting process was open and fair because the Health and Human Services did not document the rationale for the contractor selection. Cause: The Health and Human Services does not have processes in place to ensure federal requirements for procurement are followed. Recommendation: We recommend the Health and Human Services maintain documentation on the history of a procurement, provide for full and open competition, and perform a cost or price analysis to support compliance with Title 2 U.S. Code of Federal Regulations §§ 200.318, 200.319, and 200.324. View of Responsible Official: Concur
2025-006 Eligibility – MAXIS Prior Year Finding Number: 2024-006 Year of Finding Origination: 2011 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Grants to States for Medicaid Award Number and Year: 2505MN5ADM; 2025 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 42 U.S. Code of Federal Regulations §§ 435.911 and 435.945 require the state Medicaid agency to determine and verify eligibility of enrollees in Medicaid. The Minnesota Department of Human Services provides the Minnesota Health Care Programs Eligibility Policy Manual. The manual contains the Minnesota Department of Human Services eligibility policies for the Minnesota Health Care Programs, including the eligibility requirements of Grants to States for Medicaid. Specific eligibility requirements are included for recipients’ citizenship verification and asset verification. Minnesota Statutes, Section 256B.05, requires agencies to administer Grants to States for Medicaid. Condition: The Minnesota Department of Human Services maintains the computer system, MAXIS, which is used by the Health and Human Services to support the eligibility determination process. In the case files reviewed for eligibility, not all documentation to support recipient eligibility was available, updated, or input correctly. The following exceptions were noted in the sample of 40 case files tested: • One recipient’s case file did not have verification of citizenship. • One recipient’s case file included amounts for client accounts (assets) that were not properly updated or supported for the most recent application or renewal. Questioned Costs: Not applicable. The Health and Human Services administers the program, but the State of Minnesota pays benefits to recipients in this program. Context: The State of Minnesota and the Health and Human Services split the eligibility determination process. Pursuant to Minnesota statutes, the Health and Human Services performs the “intake function” needed for this program, while the State maintains the MAXIS system, which supports the eligibility determination process. Recipients receive benefit payments from the State. The population consisted of 3,493 active MAXIS cases enrolled in Grants to States for Medicaid in 2025; the sample size was 40 case files. The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The improper input or updating of information into MAXIS and the lack of verification or follow-up of eligibility-determining factors increase the risk that program recipients will receive benefits when they are not eligible. Cause: Program personnel entering case file information into MAXIS did not ensure all required information was input or updated correctly, supported, or retained. Recommendation: We recommend the Health and Human Services implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists, the program personnel properly input or update the documentation in MAXIS, and the program personnel follow up on issues in a timely manner. In addition, the Health and Human Services should consider providing further training to program personnel. View of Responsible Official: Acknowledge
2025-005 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: 2024-005 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Grants to States for Medicaid Award Number and Year: 2505MN5ADM and 2505MN5MAP, 2025 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for Grants to States for Medicaid are submitted to DHS through the DHS Income Maintenance (DHS-2550) report, the Social Service Fund Report (DHS-2556), and Local Collaborative Time Study Cost Schedule Reports (DHS-3220) on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: The following exceptions were noted in the sample of 42 expenditures tested: • One claim included activity that was allocated on an incorrect full-time equivalent (FTE) split. • One claim was paid to an incorrect vendor and the correct vendor in the same period. Both claims were included in the quarterly report. • One claim was included on the incorrect report. The items noted above are included in the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2025-001) and the Child Support Services Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2025-004). In addition, the following exceptions were noted in the second and fourth quarter DHS reports tested: • The DHS-2556 reports excluded $27,318 to be reported as Direct Materials and Supplies. • The DHS-3220 reports included amounts allocated at an incorrect rate for payroll. Payroll expenditures were overstated in the second quarter by $7,016 and by $16,883 in the fourth quarter. • The DHS-3220 reports improperly included payroll amounts for two staff not eligible for reimbursement resulting in expenditures being overstated by $65,654. Questioned Costs: $121,945. $5,074 known questioned costs were determined based on exceptions noted from a sample of transactions tested, and $116,871 known questioned costs were determined based on the exceptions noted in the DHS-2556 and DHS-3220 reports tested. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities and costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $2,653,443, consisting of 6,791 transactions. A sample of 40 expenditures was selected for testing and was then expanded to include two Grants to States for Medicaid expenditures included in Child Support Services testing. The sample of 42 transactions totaled $130,315. The reporting population consisted of four quarterly DHS-2550, four quarterly DHS-2556, and four quarterly Public Health DHS-3220 reports; the sample was two quarterly DHS-2550, two quarterly DHS-2556, and two quarterly Public Health DHS-3220 reports. The sample sizes were based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits, and subsequently expanded. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation and review of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reporting incorrectly. View of Responsible Official: Concur
2025-004 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: 2024-004 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.563 Child Support Services Award Number and Year: 2501MNSCSS and 2501MNICSS, 2025 Pass-Through Agency: Minnesota Department of Human Services and Minnesota Department of Children, Youth, and Families Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for Child Support Services are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 report on a quarterly basis. DHS provides reporting instructions, including information regarding eligible and ineligible costs. Condition: The following exceptions were noted in the sample of 40 expenditures tested: • One claim included activity that was allocated on an incorrect full-time equivalent (FTE) split. • One claim was paid to an incorrect vendor and the correct vendor in the same period. Both claims were included in the quarterly report. • One claim was included on the incorrect report. The items noted above are included in the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2025-001) and the Grants to States for Medicaid Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting finding (2025-005). Questioned Costs: Known questioned costs and likely questioned costs were under $25,000. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $1,083,658, consisting of 2,196 transactions. The sample of 40 transactions totaled $159,828. The sample sizes were based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend the Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with costs allocated incorrectly. View of Responsible Official: Acknowledge