Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects
Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021;
W912L2-22-2-1000, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Defense
Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles
Questioned costs: $125,288
Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows:
• $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms.
• $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form.
Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers.
Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created.
Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program.
2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program.
3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects
Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021;
W912L2-22-2-1000, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Defense
Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles
Questioned costs: $125,288
Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows:
• $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms.
• $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form.
Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers.
Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created.
Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program.
2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program.
3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings numbers and names: 14.228 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
14.228 COVID-19 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
Award numbers and years: B-15-DC-04-0001, July 1, 2015 through September 1, 2022;
B-16-DC-04-0001, July 1, 2016 through September 1, 2023;
B-17-DC-04-0001, July 1, 2017 through September 1, 2024;
B-18-DC-04-0001, July 1, 2018 through September 1, 2025;
B-19-DC-04-0001, July 1, 2019 through September 1, 2026;
B-20-DC-04-0001, July 1, 2020 through September 1, 2027;
B-20-DW-04-0001, July 7, 2021 through July 1, 2027;
B-21-DC-04-0001, July 1, 2021 through September 1, 2028
Federal agency: U.S. Department of Housing and Urban Development
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Housing (Department) failed to report required information on the federal government’s reporting system related to its $8.5 million in Community Development Block Grants/State’s Program (CDBG) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 9 subawards for these federal programs at the Department and found that, for 6 of these subawards, the Department failed to report the following:
• Required information within the time frame for 3 subawards tested, totaling nearly $7.1 million, resulting in each subaward’s report being submitted 2, 4, and 7 months late.
• Correct subaward amounts for 1 subaward tested, totaling $100,000, resulting from an amended increase not being reported.
• Correct key elements, such as the subaward action date, for 4 subawards we tested, totaling over $1.5 million.
The table below describes results for the subawards we tested.
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
9 0 3 1 0 4
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
$8,536,851 $0 $7,054,369 $100,000 $0 $1,527,142
Total errors $8,681,511
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $24.2 million in federal monies related to the CDBG subawards, which comprised 94 percent of the Department’s $25.7 million total federal expenditures the Department spent for this program.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not perform sufficiently detailed independent reviews of the reports for accuracy and completeness to detect and correct errors prior to uploading subaward data to the federal government’s reporting system. Also, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. In addition, the Department reported to us that some reports were submitted late due to the federal agency not timely providing it the award’s identification number required for reporting; although, we were unable to verify whether this issue occurred.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount,
award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Be sufficiently detailed to ensure subaward data is complete and accurate and detect and correct any errors prior to uploading the report to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system is complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 14.228 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
14.228 COVID-19 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
Award numbers and years: B-15-DC-04-0001, July 1, 2015 through September 1, 2022;
B-16-DC-04-0001, July 1, 2016 through September 1, 2023;
B-17-DC-04-0001, July 1, 2017 through September 1, 2024;
B-18-DC-04-0001, July 1, 2018 through September 1, 2025;
B-19-DC-04-0001, July 1, 2019 through September 1, 2026;
B-20-DC-04-0001, July 1, 2020 through September 1, 2027;
B-20-DW-04-0001, July 7, 2021 through July 1, 2027;
B-21-DC-04-0001, July 1, 2021 through September 1, 2028
Federal agency: U.S. Department of Housing and Urban Development
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Housing (Department) failed to report required information on the federal government’s reporting system related to its $8.5 million in Community Development Block Grants/State’s Program (CDBG) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 9 subawards for these federal programs at the Department and found that, for 6 of these subawards, the Department failed to report the following:
• Required information within the time frame for 3 subawards tested, totaling nearly $7.1 million, resulting in each subaward’s report being submitted 2, 4, and 7 months late.
• Correct subaward amounts for 1 subaward tested, totaling $100,000, resulting from an amended increase not being reported.
• Correct key elements, such as the subaward action date, for 4 subawards we tested, totaling over $1.5 million.
The table below describes results for the subawards we tested.
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
9 0 3 1 0 4
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
$8,536,851 $0 $7,054,369 $100,000 $0 $1,527,142
Total errors $8,681,511
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $24.2 million in federal monies related to the CDBG subawards, which comprised 94 percent of the Department’s $25.7 million total federal expenditures the Department spent for this program.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not perform sufficiently detailed independent reviews of the reports for accuracy and completeness to detect and correct errors prior to uploading subaward data to the federal government’s reporting system. Also, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. In addition, the Department reported to us that some reports were submitted late due to the federal agency not timely providing it the award’s identification number required for reporting; although, we were unable to verify whether this issue occurred.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount,
award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Be sufficiently detailed to ensure subaward data is complete and accurate and detect and correct any errors prior to uploading the report to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system is complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 17.225 COVID-19 Unemployment Insurance
Award number and year: None
Federal agency: U.S. Department of Labor
Compliance requirement: Eligibility
Questioned costs: None
Condition—As reported in the prior year findings 2021-03 and 2021-108, the Department of Economic Security (DES) reported that it paid 108,377 valid unemployment insurance (UI) claimants $218.4 million of federally funded Pandemic Unemployment Assistance (PUA) benefits above the State’s $117-minimum weekly UI benefit, up to $240 weekly, as allowed by federal regulations.1,2 However, DES did not determine whether claimants who were eligible to receive the weekly UI benefit were also qualified to receive the additional weekly UI benefits provided under the CARES Act UI benefits programs within the required time frame. Specifically, DES did not determine whether those claimants had submitted the wage documentation within 21 days of applying, as required; immediately reduce the claimants’ future weekly benefit payments to the $117-minimum weekly UI benefit; and determine how much it had overpaid those claimants. Subsequently, DES reported to us that as of July 19, 2023, it completed its wage evaluation of claimants’ information to determine if and how much of the $218.4 million in PUA benefits above the weekly minimum it overpaid those claimants between May 18, 2020 and September 4, 2021, the end of the CARES Act UI benefits programs.
Our tests of eligibility for 60 valid claimants identified noncompliance for 7 of those claimants who DES determined were qualified to receive the $117-minimum weekly UI benefit but received weekly benefits exceeding the minimum. Specifically, the claimants applied for PUA benefits between May 2020 and June 2021. Although claimants may have submitted documentation to support the additional weekly benefit amount DES paid to them, DES did not complete its wage evaluations for the 7 claimants until between February and July 2023, which resulted in DES acting on them, as follows, and our identifying no associated questioned costs accordingly:
# of claimants Total excess benefit payments above the minimum weekly benefit DES wage evaluation results DES action taken
2 $8,660 Determined eligible to receive benefit payments above the minimum weekly benefit. No further action.
5 $16,447 Determined it incorrectly overpaid excess benefits at no fault of the claimant. Waived the claimants’ repayment, as allowed by federal regulation.3,4
Effect—DES reported, as of July 2023, it paid $163.5 million to valid claimants exceeding the $117-minimum weekly UI benefit that it considered overpayments; DES could waive claimants’ repayments if certain criteria were met for doing so or recover to the extent possible and return to the federal government. The overpayments to valid claimants affected only the CARES Act UI benefits programs. They had no effect on the State’s regular UI program, which the State has jointly administered with the federal government for over 30 years, because these same issues were not identified in that program.
Cause—As described in the prior year finding 2021-01, in fiscal year 2020, DES contracted to use a new UI benefits system to quickly implement the new federal CARES Act UI benefits programs, which took time to get online and ready to process its first UI benefits claims. At that time, the system did not have an alert to notify it of claimants who were receiving more than the minimum weekly UI benefit amount but who had not submitted wage documentation within 21 days of applying.1 Additionally, DES reported it did not initially have the staff needed to process the volume of CARES Act UI benefits claims during fiscal years 2020 and 2021, and it took until July 19, 2023, to review all claimants’ files who received above the State’s $117-minimum weekly UI benefit.
Criteria—Federal regulations prescribe the PUA program requirements that apply to claimants and that DES must follow.5 Specifically, federal regulation states that claimants who are eligible to participate in the PUA program are entitled to receive the State’s $117-minimum weekly UI benefit, and claimants may receive an increased PUA weekly benefit amount up to a maximum—$240 in Arizona—if the claimant submits wage documentation within 21 days of applying.6,7 Federal regulations require states to determine and immediately pay a weekly benefit amount based on the claimants’ self-certification of eligibility and wages contained in the claimants’ application. Claimants who self-certify for more than the minimum weekly benefit amount are required to submit wage documentation within 21 days of applying for the additional weekly PUA benefit, and states are then required to immediately determine the accuracy of each claimant’s weekly benefit amount based on the claimant’s submitted wage documentation.6,7 For claimants who did not submit the required wage documentation within 21 days of applying, federal regulation requires states to immediately reduce the claimants’ future benefit payments to the minimum weekly benefit amount and consider PUA payments exceeding the minimum weekly benefit as overpayments.7 In addition, federal regulation requires states to take all reasonable measures under state and federal laws to recover overpayments to claimants, regardless of whether the overpayment resulted from error or fraud on the claimant’s part.8 However, in February 2022, federal regulation was issued that lists 7 scenarios under which states may waive recovery of CARES Act programs overpayments from claimants if the state determines specific criteria have been met, including that the claimant was not at fault.4 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms. (2 CFR §200.303).
Recommendations—DES should:
1. When identifying and establishing overpayments, determine if it will apply a waiver.
2. Bill claimants for overpayments and arrange payment plans with claimants, where required, and repay any recovered overpayments to the federal government, as required.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-108 and was initially reported in fiscal year 2020.
1 Arizona Auditor General. (2022). State of Arizona June 30, 2021, Single Audit Report. Phoenix, AZ. Retrieved 08/02/23 from https://www.azauditor.gov/sites/default/files/StateOfArizonaJune30_2021SingleAudit.pdf.
2 Congress passed several laws that essentially expanded unemployment insurance through new federally funded programs for a period of time to provide economic relief to individuals who were unable to work because of the COVID-19 pandemic and established the Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and Federal Pandemic Unemployment Compensation programs (FPUC). The PUA program, which provided unemployment compensation through September 6, 2021—or September 4, 2021, for the State of Arizona—to individuals who were not traditionally eligible for benefits under regular UI programs, such as those who were self-employed workers, independent contractors, and gig-economy workers; and those with limited work histories and certain other workers whose employment was affected by the COVID-19 pandemic. These programs provided claimants with a minimum weekly benefit, pursuant to each state’s unemployment compensation law, and anything above Arizona’s minimum weekly benefit of $117—up to $240 total per week in Arizona—would require wage verification. In addition, the FPUC program supplemented $600 to the weekly benefits an individual may receive under regular UI or PUA through July 31, 2020, provided they were eligible to participate in the UI programs. Again on December 26, 2020, the FPUC program supplemented $300 to the weekly benefits an individual may receive under regular UI or PUA through September 6, 2021 or September 4, 2021, in Arizona (Coronavirus Aid, Relief, and Economic Security [CARES] Act of 2020 [Public Law 116-136], Division N, Title II, Subtitle A {2020}; as amended by the Consolidated Appropriations Act of 2021 [Pub. L. 116-260], Title II, Subtitle A; as amended by the American Rescue Plan Act of 2021 [Pub. L.117–2], Title IX, Subtitle A, Sec. 9011 [2021]).
3 On January 8, 2021, the U.S. Department of Labor (DOL) issued updated guidance that permits states to waive recovery of CARES Act programs overpayments if they choose to apply waivers to the CARES Act programs if the state determines that: (i) the overpayment was without fault on the part of the individual and (ii) that repayment would be contrary to equity and good conscience. U.S. Department of Labor, Office of the Inspector General (2021). Unemployment Insurance Program Letter No. 16-20, Change 4. Retrieved 8/2/23 from https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2021/UIPL_16-20_Change_4_acc.pdf.
4 On February 7, 2022, the U.S. Department of Labor (DOL) issued updated guidance that lists 7 scenarios under which states may waive recovery of CARES Act programs overpayments if they choose to apply waivers to the CARES Act programs. The list includes 2 previously identified scenarios from the DOL guidance issued on May 5, 2021. U.S. Department of Labor, Office of the Inspector General (2022). Unemployment Insurance Program Letter No. 20-21, Change 1. Retrieved 8/2/23 from https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2022/UIPL_20-21_Change_1.pdf.
5 On March 27, 2020, the CARES Act, Section 2102(a)(3)(A), provided the criteria for which an individual self-certifies eligibility for PUA under the presidentially declared public health emergency resulting from the COVID-19 pandemic. The self-certification required claimants to self-declare that they were eligible for the PUA program and were able to work and available for work but unable to do so because of at least 1 specific, qualifying COVID-19-related reason. In addition, the CARES Act, §2102(h), applied the Disaster Unemployment Assistance program’s administrative requirements to PUA since PUA was similar to unemployment compensation provided under presidentially declared disasters.
6 20 CFR §625.6(e).
7 U.S. Department of Labor, Office of the Inspector General (2020). Unemployment Insurance Program Letter No. 16-20, Change 1, Attachment I, Question 20. Retrieved 8/2/23 from https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2020/UIPL_16-20_Change_1_Attachment_1.pdf.
8 20 CFR §625.14[a].
Assistance Listings number and name: 17.225 Unemployment Insurance
Award number and year: None
Federal agency: U.S. Department of Labor
Compliance requirement: Special tests and provisions—Benefits payments
Questioned costs: Not applicable
Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not meet the minimum percentage completion rates for its Benefit Accuracy Measurement (BAM) program to investigate cases of its regular unemployment insurance (UI) program’s paid and denied claims for the fiscal year ended June 30, 2022. Specifically, for batches 202127 through 202226 of paid and denied claims we tested, DES’ percentage completion rates for its paid and denied claims case investigations were as follows:
Percentage of paid claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 79.00% 44.79%
90 days of the batches’ week ending date 95.00% 65.83%
120 days of calendar year-end 98.00% 81.25%
Percentage of denied claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 60.00% 56.00%
90 days of the batches’ week ending date 85.00% 80.89%
120 days of calendar year-end 98.00% 91.56%
Effect—By not completing the required minimum percentage of paid and denied claims case investigations, DES’ BAM unit, which performs the investigations, is at an elevated risk of not detecting and reporting accurate error rates and the types and causes of benefit payment errors to DES’ management and the federal agency. Consequently, lacking complete and accurate information, DES management may not develop and implement plans for corrective actions to improve its benefit accuracy rates, as required by the federal agency.
Cause—DES reported that it failed to meet the required minimum percentage completion rates for its paid and denied claims case investigations because, since August 2019, its BAM unit maintained a 50 percent staff and turnover rate.
Criteria—The BAM program is the federal agency’s quality control system designed to assess the accuracy of UI program paid and denied claims, and states are required to investigate paid and denied claims as part of this program unless exempted from these requirements by the federal agency. Federal regulation requires DES to complete prompt and in-depth case investigations of paid and denied claims to determine if its administration of the UI benefit program is consistent with State and federal law (20 CFR §602.21[d]). Accordingly, federal guidance requires DES to complete its paid and denied claims case investigations as described in the tables presented above.1
Recommendation—DES should meet the required minimum percentage rates for completing UI program paid and denied claims case investigations by DES management allocating sufficient staffing and providing training to new staff of its BAM unit.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-110 and was initially reported in fiscal year 2020.
1 U.S. Department of Labor. (2009). Employment training handbook, No. 395, 5th Edition, Chapter VI, Completion of Cases and Timely Data Entry, page VI-11, Chapter VIII, Completion of CDA Cases and Timely Data Entry, pages VIII-2 and VIII-3. Retrieved 8/31/23 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2009/ETHandbook_395_Ch5_acc.pdf.
Assistance Listings number and name: 17.225 Unemployment Insurance
Award number and year: None
Federal agency: U.S. Department of Labor
Compliance requirement: Special tests and provisions—Benefits payments
Questioned costs: Not applicable
Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not meet the minimum percentage completion rates for its Benefit Accuracy Measurement (BAM) program to investigate cases of its regular unemployment insurance (UI) program’s paid and denied claims for the fiscal year ended June 30, 2022. Specifically, for batches 202127 through 202226 of paid and denied claims we tested, DES’ percentage completion rates for its paid and denied claims case investigations were as follows:
Percentage of paid claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 79.00% 44.79%
90 days of the batches’ week ending date 95.00% 65.83%
120 days of calendar year-end 98.00% 81.25%
Percentage of denied claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 60.00% 56.00%
90 days of the batches’ week ending date 85.00% 80.89%
120 days of calendar year-end 98.00% 91.56%
Effect—By not completing the required minimum percentage of paid and denied claims case investigations, DES’ BAM unit, which performs the investigations, is at an elevated risk of not detecting and reporting accurate error rates and the types and causes of benefit payment errors to DES’ management and the federal agency. Consequently, lacking complete and accurate information, DES management may not develop and implement plans for corrective actions to improve its benefit accuracy rates, as required by the federal agency.
Cause—DES reported that it failed to meet the required minimum percentage completion rates for its paid and denied claims case investigations because, since August 2019, its BAM unit maintained a 50 percent staff and turnover rate.
Criteria—The BAM program is the federal agency’s quality control system designed to assess the accuracy of UI program paid and denied claims, and states are required to investigate paid and denied claims as part of this program unless exempted from these requirements by the federal agency. Federal regulation requires DES to complete prompt and in-depth case investigations of paid and denied claims to determine if its administration of the UI benefit program is consistent with State and federal law (20 CFR §602.21[d]). Accordingly, federal guidance requires DES to complete its paid and denied claims case investigations as described in the tables presented above.1
Recommendation—DES should meet the required minimum percentage rates for completing UI program paid and denied claims case investigations by DES management allocating sufficient staffing and providing training to new staff of its BAM unit.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-110 and was initially reported in fiscal year 2020.
1 U.S. Department of Labor. (2009). Employment training handbook, No. 395, 5th Edition, Chapter VI, Completion of Cases and Timely Data Entry, page VI-11, Chapter VIII, Completion of CDA Cases and Timely Data Entry, pages VIII-2 and VIII-3. Retrieved 8/31/23 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2009/ETHandbook_395_Ch5_acc.pdf.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number
and name: 84.425F COVID-19 Education Stabilization Fund—Institutional Portion
Award number and year: P425F200677, May 4, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirements: Allowable costs/cost principles and cash management
Questioned costs: $10,217,259
Condition—Contrary to federal guidance and regulations and Northern Arizona University’s (University) federal indirect cost agreement, for fiscal years 2020 through 2022, the University incorrectly calculated its federal indirect costs by applying its indirect cost rate to capital expenditures and lost revenues and requested and received reimbursement for direct program expenditures it did not incur.
Effect—The University overcharged $10,217,259 of unallowed costs to its HEERF program’s institutional portion for fiscal years 2020 through 2022, resulting in less monies available to spend on allowable program costs for addressing institutional needs, such as defraying costs associated with COVID-19 (including lost revenue and payroll). These unallowed costs included $2,473,496 in indirect costs related to capital expenditures, $7,449,036 in indirect costs related to lost revenues, and $294,727 for direct expenditures it did not incur and that comprised 8.5 percent of the University’s portion of the program’s total federal award expenditures for fiscal years 2020 through 2022. The University returned these unallowed costs to the U.S. Department of Education (ED) on August 18, 2023.
Cause—The University did not properly train the individual administering the program or require secondary reviews of indirect-cost calculations and reimbursement requests. Specifically, despite the requirements in its federal indirect cost rate agreement and ED’s guidance, the University’s administration reported that the individual performing the indirect-cost calculation was not properly trained on calculating indirect costs and therefore, did not realize that the indirect cost rate should not have been applied to capital expenditures and lost revenues. Also, the University did not follow written policy and have a second employee who was knowledgeable about the program review and approve the indirect-cost calculation for accuracy. Similarly, a second employee did not review reimbursement requests or reconcile program expenditures to its financial accounting system, and the University’s policy lacked such requirements.
Criteria—Federal guidance and regulations require the University to follow its federal indirect cost agreement to apply and calculate indirect costs allocated to federal programs at the specific percentages for specific costs that comprise the program’s base expenditures.1 The University’s federal indirect cost agreement and ED’s guidance does not allow the University to apply an indirect cost rate to its capital expenditures and estimated amount of lost revenue.2 In addition, University policy requires an independent review and approval of all transactions recorded in its accounting system, including indirect-cost calculations, to ensure that they are appropriate, accurate, and comply with applicable laws and regulations (Northern Arizona University Comptroller Manual, CMP 603). Further, federal regulation requires the University to use the reimbursement method to administer the program, whereby the Office is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[b][3]). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The University should:
1. Correctly calculate federal indirect costs by:
a. Training employees responsible for calculating federal program indirect costs to properly apply the award’s indirect cost rate to only allowable program expenditures as outlined in the indirect cost agreement and grant awards.
b. Following written policy for reviewing federal program transactions, including ensuring indirect-cost calculations are properly reviewed and approved.
2. Ensure only federal program costs incurred are requested for reimbursement by improving its written policy to require a second employee to reconcile program expenditures recorded on its financial accounting system to the reimbursement request before approving the request to be submitted to the federal grantor.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 U.S. Department of Education. (2021). Higher Education Emergency Relief Fund III—Frequently Asked Questions, Question 43. Retrieved 5/19/2023 from https://www2.ed.gov/about/offices/list/ope/arpfaq.pdf. U.S. Office of Management and Budget. (2021). Appendix III to 2 CFR Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determinations for Institutions of Higher Education. Retrieved 5/19/2023 from https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/appendix-Appendix%20III%20to%20Part%20200.
2 Executive Office of the President, Office of Management and Budget. 2 CFR Part 200, Appendix XI Compliance Supplement, page 4-84.425-ESF-38. (2002). Retrieved 5/19/2023 from https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf.
Assistance Listings number
and name: 84.425F COVID-19 Education Stabilization Fund—Institutional Portion
Award number and year: P425F200677, May 4, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirements: Allowable costs/cost principles and cash management
Questioned costs: $10,217,259
Condition—Contrary to federal guidance and regulations and Northern Arizona University’s (University) federal indirect cost agreement, for fiscal years 2020 through 2022, the University incorrectly calculated its federal indirect costs by applying its indirect cost rate to capital expenditures and lost revenues and requested and received reimbursement for direct program expenditures it did not incur.
Effect—The University overcharged $10,217,259 of unallowed costs to its HEERF program’s institutional portion for fiscal years 2020 through 2022, resulting in less monies available to spend on allowable program costs for addressing institutional needs, such as defraying costs associated with COVID-19 (including lost revenue and payroll). These unallowed costs included $2,473,496 in indirect costs related to capital expenditures, $7,449,036 in indirect costs related to lost revenues, and $294,727 for direct expenditures it did not incur and that comprised 8.5 percent of the University’s portion of the program’s total federal award expenditures for fiscal years 2020 through 2022. The University returned these unallowed costs to the U.S. Department of Education (ED) on August 18, 2023.
Cause—The University did not properly train the individual administering the program or require secondary reviews of indirect-cost calculations and reimbursement requests. Specifically, despite the requirements in its federal indirect cost rate agreement and ED’s guidance, the University’s administration reported that the individual performing the indirect-cost calculation was not properly trained on calculating indirect costs and therefore, did not realize that the indirect cost rate should not have been applied to capital expenditures and lost revenues. Also, the University did not follow written policy and have a second employee who was knowledgeable about the program review and approve the indirect-cost calculation for accuracy. Similarly, a second employee did not review reimbursement requests or reconcile program expenditures to its financial accounting system, and the University’s policy lacked such requirements.
Criteria—Federal guidance and regulations require the University to follow its federal indirect cost agreement to apply and calculate indirect costs allocated to federal programs at the specific percentages for specific costs that comprise the program’s base expenditures.1 The University’s federal indirect cost agreement and ED’s guidance does not allow the University to apply an indirect cost rate to its capital expenditures and estimated amount of lost revenue.2 In addition, University policy requires an independent review and approval of all transactions recorded in its accounting system, including indirect-cost calculations, to ensure that they are appropriate, accurate, and comply with applicable laws and regulations (Northern Arizona University Comptroller Manual, CMP 603). Further, federal regulation requires the University to use the reimbursement method to administer the program, whereby the Office is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[b][3]). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The University should:
1. Correctly calculate federal indirect costs by:
a. Training employees responsible for calculating federal program indirect costs to properly apply the award’s indirect cost rate to only allowable program expenditures as outlined in the indirect cost agreement and grant awards.
b. Following written policy for reviewing federal program transactions, including ensuring indirect-cost calculations are properly reviewed and approved.
2. Ensure only federal program costs incurred are requested for reimbursement by improving its written policy to require a second employee to reconcile program expenditures recorded on its financial accounting system to the reimbursement request before approving the request to be submitted to the federal grantor.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 U.S. Department of Education. (2021). Higher Education Emergency Relief Fund III—Frequently Asked Questions, Question 43. Retrieved 5/19/2023 from https://www2.ed.gov/about/offices/list/ope/arpfaq.pdf. U.S. Office of Management and Budget. (2021). Appendix III to 2 CFR Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determinations for Institutions of Higher Education. Retrieved 5/19/2023 from https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/appendix-Appendix%20III%20to%20Part%20200.
2 Executive Office of the President, Office of Management and Budget. 2 CFR Part 200, Appendix XI Compliance Supplement, page 4-84.425-ESF-38. (2002). Retrieved 5/19/2023 from https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf.
Assistance Listings number
and name: 84.425F COVID-19 Education Stabilization Fund—Institutional Portion
Award number and year: P425F200677, May 4, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirements: Allowable costs/cost principles and cash management
Questioned costs: $10,217,259
Condition—Contrary to federal guidance and regulations and Northern Arizona University’s (University) federal indirect cost agreement, for fiscal years 2020 through 2022, the University incorrectly calculated its federal indirect costs by applying its indirect cost rate to capital expenditures and lost revenues and requested and received reimbursement for direct program expenditures it did not incur.
Effect—The University overcharged $10,217,259 of unallowed costs to its HEERF program’s institutional portion for fiscal years 2020 through 2022, resulting in less monies available to spend on allowable program costs for addressing institutional needs, such as defraying costs associated with COVID-19 (including lost revenue and payroll). These unallowed costs included $2,473,496 in indirect costs related to capital expenditures, $7,449,036 in indirect costs related to lost revenues, and $294,727 for direct expenditures it did not incur and that comprised 8.5 percent of the University’s portion of the program’s total federal award expenditures for fiscal years 2020 through 2022. The University returned these unallowed costs to the U.S. Department of Education (ED) on August 18, 2023.
Cause—The University did not properly train the individual administering the program or require secondary reviews of indirect-cost calculations and reimbursement requests. Specifically, despite the requirements in its federal indirect cost rate agreement and ED’s guidance, the University’s administration reported that the individual performing the indirect-cost calculation was not properly trained on calculating indirect costs and therefore, did not realize that the indirect cost rate should not have been applied to capital expenditures and lost revenues. Also, the University did not follow written policy and have a second employee who was knowledgeable about the program review and approve the indirect-cost calculation for accuracy. Similarly, a second employee did not review reimbursement requests or reconcile program expenditures to its financial accounting system, and the University’s policy lacked such requirements.
Criteria—Federal guidance and regulations require the University to follow its federal indirect cost agreement to apply and calculate indirect costs allocated to federal programs at the specific percentages for specific costs that comprise the program’s base expenditures.1 The University’s federal indirect cost agreement and ED’s guidance does not allow the University to apply an indirect cost rate to its capital expenditures and estimated amount of lost revenue.2 In addition, University policy requires an independent review and approval of all transactions recorded in its accounting system, including indirect-cost calculations, to ensure that they are appropriate, accurate, and comply with applicable laws and regulations (Northern Arizona University Comptroller Manual, CMP 603). Further, federal regulation requires the University to use the reimbursement method to administer the program, whereby the Office is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[b][3]). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The University should:
1. Correctly calculate federal indirect costs by:
a. Training employees responsible for calculating federal program indirect costs to properly apply the award’s indirect cost rate to only allowable program expenditures as outlined in the indirect cost agreement and grant awards.
b. Following written policy for reviewing federal program transactions, including ensuring indirect-cost calculations are properly reviewed and approved.
2. Ensure only federal program costs incurred are requested for reimbursement by improving its written policy to require a second employee to reconcile program expenditures recorded on its financial accounting system to the reimbursement request before approving the request to be submitted to the federal grantor.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 U.S. Department of Education. (2021). Higher Education Emergency Relief Fund III—Frequently Asked Questions, Question 43. Retrieved 5/19/2023 from https://www2.ed.gov/about/offices/list/ope/arpfaq.pdf. U.S. Office of Management and Budget. (2021). Appendix III to 2 CFR Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determinations for Institutions of Higher Education. Retrieved 5/19/2023 from https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/appendix-Appendix%20III%20to%20Part%20200.
2 Executive Office of the President, Office of Management and Budget. 2 CFR Part 200, Appendix XI Compliance Supplement, page 4-84.425-ESF-38. (2002). Retrieved 5/19/2023 from https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—The Arizona Health Care Cost Containment System (AHCCCS) Office of Inspector General and the Arizona Attorney General’s Office became aware of potential fraudulent billing practices including significant increases in billing for outpatient behavioral health services. These circumstances triggered a multi-agency review and investigation of potential fraud, waste and abuse. Ultimately, this led AHCCCS to connect the irregular billing of these services with alleged criminal activity targeting indigenous peoples and other vulnerable Arizonans. As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of Federal Fiscal Year 2020). AHCCCS’ contracted providers as of June 30, 2022 totaled 120,566. These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
The Credible Allegation of Fraud (CAF) payment suspensions noted above are associated with wide-ranging investigations into fraudulent Medicaid billing by the named providers. The investigations are ongoing. However, AHCCCS believes that credible evidence has been established that individuals were targeted and aggressively recruited with false promises of food, treatment, and housing, only to be taken to locations where providers billed for services that were not provided or were not appropriate or necessary. For example, providers billed for:
• Excessive hours of services in a 24-hour period for a single member.
• Multiple services for the same member at the same time.
• AHCCCS members who were not physically present (“ghost billing”).
• Services after a member’s date of death.
• Services that were not medically necessary.
Effect—As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of federal fiscal year 2020). These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
Once a credible allegation of fraud determination is made, AHCCCS is required to suspend all payments to a provider unless there is good cause not to while investigations are conducted. The credible allegation of fraud determination results from the agency’s preliminary investigation, and the agency must then make a fraud referral to the Arizona Attorney General’s Healthcare Fraud and Abuse Section or a federal law enforcement agency for a full investigation. During this time, providers may continue to bill AHCCCS for services provided, but any reimbursement to these providers is withheld pending the outcome of further investigation. Under State statute, providers are entitled to appeal a suspension placed by AHCCCS. AHCCCS is working closely with the Arizona Attorney General’s Healthcare Fraud and Abuse Section, the Federal Bureau of Investigation (FBI), the U.S. Department of Health and Human Services (HHS), the U.S. Attorney’s Office, the Internal Revenue Service (IRS), and local and tribal law enforcement to disrupt organized bad actors, apprehend them, and prosecute them to the full extent allowed by law. At present, the investigation is on-going, and AHCCCS is not currently able to estimate a total overpayment or amount of improper payments made to the providers.
This is deemed to be a material weakness in internal control of compliance.
Cause—AHCCCS did not have sufficient controls in place to safeguard against unnecessary utilization of care and services and to prevent fraud. Additionally, AHCCCS did not have sufficient procedures for the ongoing pre- and post-payment review of behavioral health claims. While AHCCCS’ claims processing system uses the CMS required claim edit protocols to look for improperly billed claims as noted in the National Correct Coding Initiative (NCCI) and such edit protocols are updated regularly per CMS requirements, AHCCCS did not have sufficient additional claim edits that were necessary for behavioral health claims. For example, AHCCCS did not have sufficient edits to restrict the inappropriate use of per diem codes or restrict some behavioral health codes from being billed for the same member on the same date of service. Further, AHCCCS did not have sufficient controls in which claims were reviewed by a medical professional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Credible Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
AHCCCS must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. AHCCCS must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. AHCCCS may conduct this review directly or may contract with an independent entity (42 CFR §§456.5, 456.22 and 456.23).
Recommendation—We recommend that AHCCCS review and enhance existing policies and procedures and related controls to ensure sufficient processes and controls are in place to safeguard against unnecessary utilization of care and services and to prevent fraud. We also recommend that AHCCCS institute an ongoing and appropriate pre- and post-payment review of behavioral health claims. Likewise, AHCCCS should increase their level of scrutiny over certain behavioral health provider types.
We further recommend that AHCCCS examine the existing Medicaid payment system and implement system-wide improvements. The improvements should include the establishment of additional reporting to flag concerning claims for prepayment review, setting of billing thresholds and establishing prepayment review for various behavioral health claim types. We also recommend that AHCCCS establish sufficient controls in which claims are reviewed by a medical processional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Management of AHCCCS concurs in part with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—The Arizona Health Care Cost Containment System (AHCCCS) Office of Inspector General and the Arizona Attorney General’s Office became aware of potential fraudulent billing practices including significant increases in billing for outpatient behavioral health services. These circumstances triggered a multi-agency review and investigation of potential fraud, waste and abuse. Ultimately, this led AHCCCS to connect the irregular billing of these services with alleged criminal activity targeting indigenous peoples and other vulnerable Arizonans. As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of Federal Fiscal Year 2020). AHCCCS’ contracted providers as of June 30, 2022 totaled 120,566. These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
The Credible Allegation of Fraud (CAF) payment suspensions noted above are associated with wide-ranging investigations into fraudulent Medicaid billing by the named providers. The investigations are ongoing. However, AHCCCS believes that credible evidence has been established that individuals were targeted and aggressively recruited with false promises of food, treatment, and housing, only to be taken to locations where providers billed for services that were not provided or were not appropriate or necessary. For example, providers billed for:
• Excessive hours of services in a 24-hour period for a single member.
• Multiple services for the same member at the same time.
• AHCCCS members who were not physically present (“ghost billing”).
• Services after a member’s date of death.
• Services that were not medically necessary.
Effect—As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of federal fiscal year 2020). These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
Once a credible allegation of fraud determination is made, AHCCCS is required to suspend all payments to a provider unless there is good cause not to while investigations are conducted. The credible allegation of fraud determination results from the agency’s preliminary investigation, and the agency must then make a fraud referral to the Arizona Attorney General’s Healthcare Fraud and Abuse Section or a federal law enforcement agency for a full investigation. During this time, providers may continue to bill AHCCCS for services provided, but any reimbursement to these providers is withheld pending the outcome of further investigation. Under State statute, providers are entitled to appeal a suspension placed by AHCCCS. AHCCCS is working closely with the Arizona Attorney General’s Healthcare Fraud and Abuse Section, the Federal Bureau of Investigation (FBI), the U.S. Department of Health and Human Services (HHS), the U.S. Attorney’s Office, the Internal Revenue Service (IRS), and local and tribal law enforcement to disrupt organized bad actors, apprehend them, and prosecute them to the full extent allowed by law. At present, the investigation is on-going, and AHCCCS is not currently able to estimate a total overpayment or amount of improper payments made to the providers.
This is deemed to be a material weakness in internal control of compliance.
Cause—AHCCCS did not have sufficient controls in place to safeguard against unnecessary utilization of care and services and to prevent fraud. Additionally, AHCCCS did not have sufficient procedures for the ongoing pre- and post-payment review of behavioral health claims. While AHCCCS’ claims processing system uses the CMS required claim edit protocols to look for improperly billed claims as noted in the National Correct Coding Initiative (NCCI) and such edit protocols are updated regularly per CMS requirements, AHCCCS did not have sufficient additional claim edits that were necessary for behavioral health claims. For example, AHCCCS did not have sufficient edits to restrict the inappropriate use of per diem codes or restrict some behavioral health codes from being billed for the same member on the same date of service. Further, AHCCCS did not have sufficient controls in which claims were reviewed by a medical professional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Credible Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
AHCCCS must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. AHCCCS must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. AHCCCS may conduct this review directly or may contract with an independent entity (42 CFR §§456.5, 456.22 and 456.23).
Recommendation—We recommend that AHCCCS review and enhance existing policies and procedures and related controls to ensure sufficient processes and controls are in place to safeguard against unnecessary utilization of care and services and to prevent fraud. We also recommend that AHCCCS institute an ongoing and appropriate pre- and post-payment review of behavioral health claims. Likewise, AHCCCS should increase their level of scrutiny over certain behavioral health provider types.
We further recommend that AHCCCS examine the existing Medicaid payment system and implement system-wide improvements. The improvements should include the establishment of additional reporting to flag concerning claims for prepayment review, setting of billing thresholds and establishing prepayment review for various behavioral health claim types. We also recommend that AHCCCS establish sufficient controls in which claims are reviewed by a medical processional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Management of AHCCCS concurs in part with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—Arizona Health Care Cost Containment System (AHCCCS) did not identify and perform a preliminary investigation of potential incidents of fraud or abuse committed by members and providers on a timely basis.
Effect—Untimely fraud or abuse incident investigations could result in AHCCCS making unnecessary payments and compromise its ability to investigate cases. This is deemed to be a significant deficiency in internal control of compliance.
Cause—Management has reported to us that insufficient investigative staff impacted AHCCCS’ ability to investigate potential fraud or abuse incidents in a timely manner. Additionally, AHCCCS has not established clear time frames in which referrals received are assigned for investigation.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Creditable Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
Recommendations—We recommend that AHCCCS conduct a workload/cost analysis to evaluate whether its funding and staffing levels are sufficient to timely investigate member and provider fraud or abuse incidents. We also recommend that AHCCCS establish a policy that includes clear time frames in which referrals received are assigned for investigation and closely monitor compliance with the policy.
Management of AHCCCS concurs with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—Arizona Health Care Cost Containment System (AHCCCS) did not identify and perform a preliminary investigation of potential incidents of fraud or abuse committed by members and providers on a timely basis.
Effect—Untimely fraud or abuse incident investigations could result in AHCCCS making unnecessary payments and compromise its ability to investigate cases. This is deemed to be a significant deficiency in internal control of compliance.
Cause—Management has reported to us that insufficient investigative staff impacted AHCCCS’ ability to investigate potential fraud or abuse incidents in a timely manner. Additionally, AHCCCS has not established clear time frames in which referrals received are assigned for investigation.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Creditable Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
Recommendations—We recommend that AHCCCS conduct a workload/cost analysis to evaluate whether its funding and staffing levels are sufficient to timely investigate member and provider fraud or abuse incidents. We also recommend that AHCCCS establish a policy that includes clear time frames in which referrals received are assigned for investigation and closely monitor compliance with the policy.
Management of AHCCCS concurs with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families
93.558 COVID-19 Temporary Assistance for Needy Families
Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021;
2201AZTANF, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: $6,754
Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for:
• $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087.
• $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements.
• $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable.
Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services.
The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively.
Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1
Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract.
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements.
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations.
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability.
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise.
6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services.
7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families
93.558 COVID-19 Temporary Assistance for Needy Families
Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021;
2201AZTANF, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: $6,754
Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for:
• $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087.
• $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements.
• $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable.
Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services.
The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively.
Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1
Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract.
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements.
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations.
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability.
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise.
6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services.
7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families
93.558 COVID-19 Temporary Assistance for Needy Families
Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021;
2201AZTANF, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: $6,754
Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for:
• $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087.
• $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements.
• $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable.
Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services.
The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively.
Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1
Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract.
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements.
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations.
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability.
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise.
6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services.
7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.658 Foster Care—Title IV-E
93.658 COVID-19 Foster Care—Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021;
2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: Unknown
Condition—The Department of Child Safety (Department) paid 5 childcare institutions that provided foster care services $514,154 in federal monies for foster care maintenance payments despite their ineligibility for payments and, contrary to federal regulations, allowed them to care for children before the Department completed all required child safety considerations, which included performing background checks on the childcare institutions’ employees. Specifically, for 5 of 11 childcare institutions tested, the Department did not complete 9 of 43 employee name-based criminal records background checks, also referred to as central registry background checks, until 1 to 28 days after the employees’ hire dates.
Effect—Although none of the 9 employees’ name-based criminal records checks returned a criminal record, the Department placed children in State care at potential risk by allowing some childcare institutions’ employees to care for children despite the Department not having completed the employees’ name-based criminal records background checks. Further, the Department violated federal regulations by making foster care maintenance payments to 5 childcare institutions before determining if they were eligible to receive the payments.
Cause—Due to the COVID-19 pandemic, the federal grantor allowed the Department to delay fingerprint background checks until it was safely able to do, but the Department misapplied that federal guidance to the name-based criminal records background checks.1 In addition, the Department used checklist tools to ensure compliance with these background checks that did not align with the Department’s policies and federal and State requirements for completing them, making it difficult for the Department to ensure the background checks were conducted as required.
Criteria—The Department’s policies and procedures require it to complete background checks on childcare institutions’ employees and ensure the background checks are conducted prior to the employees’ hire date (Department of Child Safety, Administrative Policy 15-32). Federal regulation requires the Department to address safety considerations of a childcare institution’s employees before the childcare institution can be considered eligible to receive maintenance payments under the program (45 CFR §1356.30). Specifically, federal and State laws require the Department to complete the following 2 background checks on all childcare institution employees, whether paid or unpaid: (1) name-based criminal records background checks (the central registry background checks) and (2) fingerprint-based background checks of national crime information databases. The federal grantor allowed a delay for the fingerprint-based background check requirement during the public health emergency resulting from the COVID-19 pandemic.1 Federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Complete the required name-based criminal records background checks on all childcare institutions’ employees before allowing employees to care for children and making foster care maintenance payments to childcare institutions.
2. Review and improve its existing procedures, including its checklist tools, to ensure they are consistent with the Department’s policies and federal and State requirements.
3. Seek additional guidance from the federal grantor, as needed, to implement administrative flexibilities to federal requirements and ensure that policies and procedures are modified and communicated to Department employees accordingly.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-113 and was initially reported in fiscal year 2021.
1 Federal and State laws require the Department to perform both central registry background checks and fingerprint-based background checks of all childcare institutions’ employees, respectively (42 USC §671[a][20] and A.R.S. §§8-804 and 41-141). During the public health emergency resulting from the COVID-19 pandemic, the federal grantor issued a letter dated April 15, 2020, granting flexibility for the fingerprinting requirement, which allowed DCS to complete the fingerprint-based background checks as soon as it could safely do so, providing that it conducted all available name-based criminal background checks in accordance with federal and State laws (U.S. Department of Health and Human Services, Administration for Children And Families. [2020]. Stafford Act Flexibility for Criminal Background Checks and Monthly Caseworker Visits in Childs Residence. Retrieved 8/23/2023 from https://www.acf.hhs.gov/sites/default/files/documents/cb/stafford_act.pdf).
Assistance Listings numbers and names: 93.658 Foster Care—Title IV-E
93.658 COVID-19 Foster Care—Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021;
2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: Unknown
Condition—The Department of Child Safety (Department) paid 5 childcare institutions that provided foster care services $514,154 in federal monies for foster care maintenance payments despite their ineligibility for payments and, contrary to federal regulations, allowed them to care for children before the Department completed all required child safety considerations, which included performing background checks on the childcare institutions’ employees. Specifically, for 5 of 11 childcare institutions tested, the Department did not complete 9 of 43 employee name-based criminal records background checks, also referred to as central registry background checks, until 1 to 28 days after the employees’ hire dates.
Effect—Although none of the 9 employees’ name-based criminal records checks returned a criminal record, the Department placed children in State care at potential risk by allowing some childcare institutions’ employees to care for children despite the Department not having completed the employees’ name-based criminal records background checks. Further, the Department violated federal regulations by making foster care maintenance payments to 5 childcare institutions before determining if they were eligible to receive the payments.
Cause—Due to the COVID-19 pandemic, the federal grantor allowed the Department to delay fingerprint background checks until it was safely able to do, but the Department misapplied that federal guidance to the name-based criminal records background checks.1 In addition, the Department used checklist tools to ensure compliance with these background checks that did not align with the Department’s policies and federal and State requirements for completing them, making it difficult for the Department to ensure the background checks were conducted as required.
Criteria—The Department’s policies and procedures require it to complete background checks on childcare institutions’ employees and ensure the background checks are conducted prior to the employees’ hire date (Department of Child Safety, Administrative Policy 15-32). Federal regulation requires the Department to address safety considerations of a childcare institution’s employees before the childcare institution can be considered eligible to receive maintenance payments under the program (45 CFR §1356.30). Specifically, federal and State laws require the Department to complete the following 2 background checks on all childcare institution employees, whether paid or unpaid: (1) name-based criminal records background checks (the central registry background checks) and (2) fingerprint-based background checks of national crime information databases. The federal grantor allowed a delay for the fingerprint-based background check requirement during the public health emergency resulting from the COVID-19 pandemic.1 Federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Complete the required name-based criminal records background checks on all childcare institutions’ employees before allowing employees to care for children and making foster care maintenance payments to childcare institutions.
2. Review and improve its existing procedures, including its checklist tools, to ensure they are consistent with the Department’s policies and federal and State requirements.
3. Seek additional guidance from the federal grantor, as needed, to implement administrative flexibilities to federal requirements and ensure that policies and procedures are modified and communicated to Department employees accordingly.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-113 and was initially reported in fiscal year 2021.
1 Federal and State laws require the Department to perform both central registry background checks and fingerprint-based background checks of all childcare institutions’ employees, respectively (42 USC §671[a][20] and A.R.S. §§8-804 and 41-141). During the public health emergency resulting from the COVID-19 pandemic, the federal grantor issued a letter dated April 15, 2020, granting flexibility for the fingerprinting requirement, which allowed DCS to complete the fingerprint-based background checks as soon as it could safely do so, providing that it conducted all available name-based criminal background checks in accordance with federal and State laws (U.S. Department of Health and Human Services, Administration for Children And Families. [2020]. Stafford Act Flexibility for Criminal Background Checks and Monthly Caseworker Visits in Childs Residence. Retrieved 8/23/2023 from https://www.acf.hhs.gov/sites/default/files/documents/cb/stafford_act.pdf).
Assistance Listings numbers and names: 93.658 Foster Care—Title IV-E
93.658 COVID-19 Foster Care—Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021;
2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: Unknown
Condition—The Department of Child Safety (Department) paid 5 childcare institutions that provided foster care services $514,154 in federal monies for foster care maintenance payments despite their ineligibility for payments and, contrary to federal regulations, allowed them to care for children before the Department completed all required child safety considerations, which included performing background checks on the childcare institutions’ employees. Specifically, for 5 of 11 childcare institutions tested, the Department did not complete 9 of 43 employee name-based criminal records background checks, also referred to as central registry background checks, until 1 to 28 days after the employees’ hire dates.
Effect—Although none of the 9 employees’ name-based criminal records checks returned a criminal record, the Department placed children in State care at potential risk by allowing some childcare institutions’ employees to care for children despite the Department not having completed the employees’ name-based criminal records background checks. Further, the Department violated federal regulations by making foster care maintenance payments to 5 childcare institutions before determining if they were eligible to receive the payments.
Cause—Due to the COVID-19 pandemic, the federal grantor allowed the Department to delay fingerprint background checks until it was safely able to do, but the Department misapplied that federal guidance to the name-based criminal records background checks.1 In addition, the Department used checklist tools to ensure compliance with these background checks that did not align with the Department’s policies and federal and State requirements for completing them, making it difficult for the Department to ensure the background checks were conducted as required.
Criteria—The Department’s policies and procedures require it to complete background checks on childcare institutions’ employees and ensure the background checks are conducted prior to the employees’ hire date (Department of Child Safety, Administrative Policy 15-32). Federal regulation requires the Department to address safety considerations of a childcare institution’s employees before the childcare institution can be considered eligible to receive maintenance payments under the program (45 CFR §1356.30). Specifically, federal and State laws require the Department to complete the following 2 background checks on all childcare institution employees, whether paid or unpaid: (1) name-based criminal records background checks (the central registry background checks) and (2) fingerprint-based background checks of national crime information databases. The federal grantor allowed a delay for the fingerprint-based background check requirement during the public health emergency resulting from the COVID-19 pandemic.1 Federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Complete the required name-based criminal records background checks on all childcare institutions’ employees before allowing employees to care for children and making foster care maintenance payments to childcare institutions.
2. Review and improve its existing procedures, including its checklist tools, to ensure they are consistent with the Department’s policies and federal and State requirements.
3. Seek additional guidance from the federal grantor, as needed, to implement administrative flexibilities to federal requirements and ensure that policies and procedures are modified and communicated to Department employees accordingly.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-113 and was initially reported in fiscal year 2021.
1 Federal and State laws require the Department to perform both central registry background checks and fingerprint-based background checks of all childcare institutions’ employees, respectively (42 USC §671[a][20] and A.R.S. §§8-804 and 41-141). During the public health emergency resulting from the COVID-19 pandemic, the federal grantor issued a letter dated April 15, 2020, granting flexibility for the fingerprinting requirement, which allowed DCS to complete the fingerprint-based background checks as soon as it could safely do so, providing that it conducted all available name-based criminal background checks in accordance with federal and State laws (U.S. Department of Health and Human Services, Administration for Children And Families. [2020]. Stafford Act Flexibility for Criminal Background Checks and Monthly Caseworker Visits in Childs Residence. Retrieved 8/23/2023 from https://www.acf.hhs.gov/sites/default/files/documents/cb/stafford_act.pdf).
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: Not applicable
Condition—The Department of Child Safety (Department) awarded $5,963,987 to 15 subrecipients during fiscal year 2022, or 4.5 percent of the Department’s $131,628,177 total federal expenditures for this federal program but did not perform the required monitoring of the subrecipients’ activities or of their compliance with the award terms and program requirements. The Department performed some monitoring during the year, which consisted only of reviewing annual progress reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—There is an increased risk that the $5,963,987 of program monies the Department awarded to the 15 subrecipients may not have been spent in accordance with the award terms and program requirements. Also, since the Department’s award terms require subrecipients to use program monies to supplement, and not supplant, costs of legal representation in child welfare court cases, the lack of monitoring could potentially have increased the risk that these monies may have supplanted these legal costs or may not have been spent to obtain adequate legal representation.
Cause—Although the Department had developed written policies and procedures in February 2022 for performing the various monitoring procedures for its subrecipients, including how it considers and assesses risk of each subrecipient and carries out required and various other monitoring procedures based on those risk assessments, it had not implemented them due to staff turnover.
Criteria—Federal regulations require the Department to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and appropriate monitoring activities based on those risk assessments; verifying single audits were conducted timely; reviewing financial and performance reports, following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (45 CFR §§75.352[b] and [d – f]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by prioritizing implementing policies and procedures to:
1. Assess the risk of each subrecipient’s noncompliance and carry out appropriate monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
3. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-116 and was initially reported in fiscal year 2021.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: Not applicable
Condition—The Department of Child Safety (Department) awarded $5,963,987 to 15 subrecipients during fiscal year 2022, or 4.5 percent of the Department’s $131,628,177 total federal expenditures for this federal program but did not perform the required monitoring of the subrecipients’ activities or of their compliance with the award terms and program requirements. The Department performed some monitoring during the year, which consisted only of reviewing annual progress reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—There is an increased risk that the $5,963,987 of program monies the Department awarded to the 15 subrecipients may not have been spent in accordance with the award terms and program requirements. Also, since the Department’s award terms require subrecipients to use program monies to supplement, and not supplant, costs of legal representation in child welfare court cases, the lack of monitoring could potentially have increased the risk that these monies may have supplanted these legal costs or may not have been spent to obtain adequate legal representation.
Cause—Although the Department had developed written policies and procedures in February 2022 for performing the various monitoring procedures for its subrecipients, including how it considers and assesses risk of each subrecipient and carries out required and various other monitoring procedures based on those risk assessments, it had not implemented them due to staff turnover.
Criteria—Federal regulations require the Department to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and appropriate monitoring activities based on those risk assessments; verifying single audits were conducted timely; reviewing financial and performance reports, following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (45 CFR §§75.352[b] and [d – f]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by prioritizing implementing policies and procedures to:
1. Assess the risk of each subrecipient’s noncompliance and carry out appropriate monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
3. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-116 and was initially reported in fiscal year 2021.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: Not applicable
Condition—The Department of Child Safety (Department) awarded $5,963,987 to 15 subrecipients during fiscal year 2022, or 4.5 percent of the Department’s $131,628,177 total federal expenditures for this federal program but did not perform the required monitoring of the subrecipients’ activities or of their compliance with the award terms and program requirements. The Department performed some monitoring during the year, which consisted only of reviewing annual progress reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—There is an increased risk that the $5,963,987 of program monies the Department awarded to the 15 subrecipients may not have been spent in accordance with the award terms and program requirements. Also, since the Department’s award terms require subrecipients to use program monies to supplement, and not supplant, costs of legal representation in child welfare court cases, the lack of monitoring could potentially have increased the risk that these monies may have supplanted these legal costs or may not have been spent to obtain adequate legal representation.
Cause—Although the Department had developed written policies and procedures in February 2022 for performing the various monitoring procedures for its subrecipients, including how it considers and assesses risk of each subrecipient and carries out required and various other monitoring procedures based on those risk assessments, it had not implemented them due to staff turnover.
Criteria—Federal regulations require the Department to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and appropriate monitoring activities based on those risk assessments; verifying single audits were conducted timely; reviewing financial and performance reports, following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (45 CFR §§75.352[b] and [d – f]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by prioritizing implementing policies and procedures to:
1. Assess the risk of each subrecipient’s noncompliance and carry out appropriate monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
3. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-116 and was initially reported in fiscal year 2021.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Child Safety (Department) failed to report certain information on the federal government’s reporting system for $5.9 million in subawards it made to 11 Arizona counties under this program. Specifically, the Department awarded federal monies to the counties to supplement, but not supplant, costs of legal representation in child welfare court cases. However, the Department had not reported any required information about the subawards, including subaward organization names and subaward amounts and terms, during fiscal year 2022 and since fiscal year 2020 when the Department began awarding program monies.
During fiscal year 2022, the Department spent $5.9 million of federal monies related to these subawards, or 4.5 percent of the Department’s $131.6 million total federal expenditures for this federal program. It spent $14.3 million of federal monies related to these subawards in the 2 prior fiscal years.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, Department staff reported they were not aware of the program’s reporting requirements in fiscal year 2022 because of an oversight.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and ensure Department employees are aware of all program requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-117 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Child Safety (Department) failed to report certain information on the federal government’s reporting system for $5.9 million in subawards it made to 11 Arizona counties under this program. Specifically, the Department awarded federal monies to the counties to supplement, but not supplant, costs of legal representation in child welfare court cases. However, the Department had not reported any required information about the subawards, including subaward organization names and subaward amounts and terms, during fiscal year 2022 and since fiscal year 2020 when the Department began awarding program monies.
During fiscal year 2022, the Department spent $5.9 million of federal monies related to these subawards, or 4.5 percent of the Department’s $131.6 million total federal expenditures for this federal program. It spent $14.3 million of federal monies related to these subawards in the 2 prior fiscal years.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, Department staff reported they were not aware of the program’s reporting requirements in fiscal year 2022 because of an oversight.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and ensure Department employees are aware of all program requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-117 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Child Safety (Department) failed to report certain information on the federal government’s reporting system for $5.9 million in subawards it made to 11 Arizona counties under this program. Specifically, the Department awarded federal monies to the counties to supplement, but not supplant, costs of legal representation in child welfare court cases. However, the Department had not reported any required information about the subawards, including subaward organization names and subaward amounts and terms, during fiscal year 2022 and since fiscal year 2020 when the Department began awarding program monies.
During fiscal year 2022, the Department spent $5.9 million of federal monies related to these subawards, or 4.5 percent of the Department’s $131.6 million total federal expenditures for this federal program. It spent $14.3 million of federal monies related to these subawards in the 2 prior fiscal years.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, Department staff reported they were not aware of the program’s reporting requirements in fiscal year 2022 because of an oversight.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and ensure Department employees are aware of all program requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-117 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects
Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021;
W912L2-22-2-1000, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Defense
Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles
Questioned costs: $125,288
Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows:
• $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms.
• $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form.
Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers.
Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created.
Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program.
2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program.
3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects
Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021;
W912L2-22-2-1000, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Defense
Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles
Questioned costs: $125,288
Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows:
• $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms.
• $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form.
Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers.
Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created.
Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program.
2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program.
3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings numbers and names: 14.228 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
14.228 COVID-19 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
Award numbers and years: B-15-DC-04-0001, July 1, 2015 through September 1, 2022;
B-16-DC-04-0001, July 1, 2016 through September 1, 2023;
B-17-DC-04-0001, July 1, 2017 through September 1, 2024;
B-18-DC-04-0001, July 1, 2018 through September 1, 2025;
B-19-DC-04-0001, July 1, 2019 through September 1, 2026;
B-20-DC-04-0001, July 1, 2020 through September 1, 2027;
B-20-DW-04-0001, July 7, 2021 through July 1, 2027;
B-21-DC-04-0001, July 1, 2021 through September 1, 2028
Federal agency: U.S. Department of Housing and Urban Development
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Housing (Department) failed to report required information on the federal government’s reporting system related to its $8.5 million in Community Development Block Grants/State’s Program (CDBG) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 9 subawards for these federal programs at the Department and found that, for 6 of these subawards, the Department failed to report the following:
• Required information within the time frame for 3 subawards tested, totaling nearly $7.1 million, resulting in each subaward’s report being submitted 2, 4, and 7 months late.
• Correct subaward amounts for 1 subaward tested, totaling $100,000, resulting from an amended increase not being reported.
• Correct key elements, such as the subaward action date, for 4 subawards we tested, totaling over $1.5 million.
The table below describes results for the subawards we tested.
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
9 0 3 1 0 4
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
$8,536,851 $0 $7,054,369 $100,000 $0 $1,527,142
Total errors $8,681,511
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $24.2 million in federal monies related to the CDBG subawards, which comprised 94 percent of the Department’s $25.7 million total federal expenditures the Department spent for this program.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not perform sufficiently detailed independent reviews of the reports for accuracy and completeness to detect and correct errors prior to uploading subaward data to the federal government’s reporting system. Also, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. In addition, the Department reported to us that some reports were submitted late due to the federal agency not timely providing it the award’s identification number required for reporting; although, we were unable to verify whether this issue occurred.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount,
award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Be sufficiently detailed to ensure subaward data is complete and accurate and detect and correct any errors prior to uploading the report to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system is complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 14.228 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
14.228 COVID-19 Community Development Block Grants/State’s Program and Non-entitlement Grants in Hawaii
Award numbers and years: B-15-DC-04-0001, July 1, 2015 through September 1, 2022;
B-16-DC-04-0001, July 1, 2016 through September 1, 2023;
B-17-DC-04-0001, July 1, 2017 through September 1, 2024;
B-18-DC-04-0001, July 1, 2018 through September 1, 2025;
B-19-DC-04-0001, July 1, 2019 through September 1, 2026;
B-20-DC-04-0001, July 1, 2020 through September 1, 2027;
B-20-DW-04-0001, July 7, 2021 through July 1, 2027;
B-21-DC-04-0001, July 1, 2021 through September 1, 2028
Federal agency: U.S. Department of Housing and Urban Development
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Housing (Department) failed to report required information on the federal government’s reporting system related to its $8.5 million in Community Development Block Grants/State’s Program (CDBG) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 9 subawards for these federal programs at the Department and found that, for 6 of these subawards, the Department failed to report the following:
• Required information within the time frame for 3 subawards tested, totaling nearly $7.1 million, resulting in each subaward’s report being submitted 2, 4, and 7 months late.
• Correct subaward amounts for 1 subaward tested, totaling $100,000, resulting from an amended increase not being reported.
• Correct key elements, such as the subaward action date, for 4 subawards we tested, totaling over $1.5 million.
The table below describes results for the subawards we tested.
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
9 0 3 1 0 4
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with incorrect key elements
$8,536,851 $0 $7,054,369 $100,000 $0 $1,527,142
Total errors $8,681,511
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $24.2 million in federal monies related to the CDBG subawards, which comprised 94 percent of the Department’s $25.7 million total federal expenditures the Department spent for this program.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not perform sufficiently detailed independent reviews of the reports for accuracy and completeness to detect and correct errors prior to uploading subaward data to the federal government’s reporting system. Also, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. In addition, the Department reported to us that some reports were submitted late due to the federal agency not timely providing it the award’s identification number required for reporting; although, we were unable to verify whether this issue occurred.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount,
award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Be sufficiently detailed to ensure subaward data is complete and accurate and detect and correct any errors prior to uploading the report to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system is complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program
14.231 COVID-19—Emergency Solutions Grant Program
Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022
E-21-DC-04-001, July 1, 2021 through September 9, 2023
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $1,425
Assistance Listings number and name: 14.267 Continuum of Care Program
Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021;
AZ0118L9T002008, February 1, 2021 through January 31, 2022;
AZ0011L9T002013, May 1, 2021 through April 30, 2022;
AZ0173L9T002004, July 1, 2021 through June 30, 2022;
AZ0009L9T002013, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Housing and Urban Development
Questioned costs: $46,352
Compliance requirement: Subrecipient monitoring
Total questioned costs: $47,777
Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for:
• $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES)
• $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES)
• $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH)
• $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH)
Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES)
The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively.
Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1
Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed.
As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Departments should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES)
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES)
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH)
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES)
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES)
6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES)
7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES)
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 16.575 Crime Victim Assistance
Award number and year: 2018-V2-GX-0012, October 1, 2017 through September 30, 2021
Federal agency: U.S. Department of Justice
Compliance requirement: Earmarking
Questioned costs: $3,208,423
Condition—Contrary to federal regulation, the Department of Public Safety did not spend the required 10 percent, or $7,080,037, of its total program expenditures on services for 2 of the 3 priority crime victim categories by the end of the grant award period of September 30, 2021. Specifically, expenditures for services to the spousal abuse victims category met the requirement; however, expenditures to the sexual assault and child abuse victims categories were at 9.4 percent, or $6,685,581, and 6 percent, or $4,266,070, respectively.
Effect—State crime victims of sexual assault and child abuse did not receive 0.6 percent, or $394,456, and 4 percent, or $2,813,967, of services, respectively, that the federal regulation required and intended for them based on the program’s priority crime victim categories. Also, the Department may have received $3,208,423 in federal program monies that it was not entitled to.
Cause—Although the Department tracked its program spending on the priority crime victim categories, it lacked effective monitoring procedures throughout the award period to ensure it met its earmarking requirements. Further, the Department lacked policies and procedures to develop an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories. Further, the Department received increased funding for the program beginning in fiscal year 2019 through fiscal year 2022 and had difficulties finding additional subrecipients to partner with it and other State agencies to meet the earmarking requirement.
Criteria—Federal regulation requires the Department to spend no less than 10 percent of its total award to provide services directly to crime victims in each of 3 priority categories—sexual assault, child abuse, and spousal abuse—and to report them to the federal agency on a quarterly basis (28 CFR §§94.104[b] and 94.106). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Monitor its program spending throughout the award period to ensure it spends no less than the required 10 percent of its total award on each of the priority crime victim categories: sexual assault, child abuse, and spousal abuse.
2. Improve its policies and procedures by developing an effective strategy to track, monitor, and report subrecipients’ spending on the priority crime victim categories.
3. Adjust its spending or subrecipient funding, as appropriate, to ensure it meets the earmarking requirement if its overall spending on any of the 3 priority crime victim categories is lower than the required 10 percent.
4. Seek additional subrecipients for it and other State agencies to partner with to serve the priority categories of crime victims, and if additional subrecipients cannot be found, work with the federal agency to request a waiver for or a reduction to the earmarking requirement.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 17.225 COVID-19 Unemployment Insurance
Award number and year: None
Federal agency: U.S. Department of Labor
Compliance requirement: Eligibility
Questioned costs: None
Condition—As reported in the prior year findings 2021-03 and 2021-108, the Department of Economic Security (DES) reported that it paid 108,377 valid unemployment insurance (UI) claimants $218.4 million of federally funded Pandemic Unemployment Assistance (PUA) benefits above the State’s $117-minimum weekly UI benefit, up to $240 weekly, as allowed by federal regulations.1,2 However, DES did not determine whether claimants who were eligible to receive the weekly UI benefit were also qualified to receive the additional weekly UI benefits provided under the CARES Act UI benefits programs within the required time frame. Specifically, DES did not determine whether those claimants had submitted the wage documentation within 21 days of applying, as required; immediately reduce the claimants’ future weekly benefit payments to the $117-minimum weekly UI benefit; and determine how much it had overpaid those claimants. Subsequently, DES reported to us that as of July 19, 2023, it completed its wage evaluation of claimants’ information to determine if and how much of the $218.4 million in PUA benefits above the weekly minimum it overpaid those claimants between May 18, 2020 and September 4, 2021, the end of the CARES Act UI benefits programs.
Our tests of eligibility for 60 valid claimants identified noncompliance for 7 of those claimants who DES determined were qualified to receive the $117-minimum weekly UI benefit but received weekly benefits exceeding the minimum. Specifically, the claimants applied for PUA benefits between May 2020 and June 2021. Although claimants may have submitted documentation to support the additional weekly benefit amount DES paid to them, DES did not complete its wage evaluations for the 7 claimants until between February and July 2023, which resulted in DES acting on them, as follows, and our identifying no associated questioned costs accordingly:
# of claimants Total excess benefit payments above the minimum weekly benefit DES wage evaluation results DES action taken
2 $8,660 Determined eligible to receive benefit payments above the minimum weekly benefit. No further action.
5 $16,447 Determined it incorrectly overpaid excess benefits at no fault of the claimant. Waived the claimants’ repayment, as allowed by federal regulation.3,4
Effect—DES reported, as of July 2023, it paid $163.5 million to valid claimants exceeding the $117-minimum weekly UI benefit that it considered overpayments; DES could waive claimants’ repayments if certain criteria were met for doing so or recover to the extent possible and return to the federal government. The overpayments to valid claimants affected only the CARES Act UI benefits programs. They had no effect on the State’s regular UI program, which the State has jointly administered with the federal government for over 30 years, because these same issues were not identified in that program.
Cause—As described in the prior year finding 2021-01, in fiscal year 2020, DES contracted to use a new UI benefits system to quickly implement the new federal CARES Act UI benefits programs, which took time to get online and ready to process its first UI benefits claims. At that time, the system did not have an alert to notify it of claimants who were receiving more than the minimum weekly UI benefit amount but who had not submitted wage documentation within 21 days of applying.1 Additionally, DES reported it did not initially have the staff needed to process the volume of CARES Act UI benefits claims during fiscal years 2020 and 2021, and it took until July 19, 2023, to review all claimants’ files who received above the State’s $117-minimum weekly UI benefit.
Criteria—Federal regulations prescribe the PUA program requirements that apply to claimants and that DES must follow.5 Specifically, federal regulation states that claimants who are eligible to participate in the PUA program are entitled to receive the State’s $117-minimum weekly UI benefit, and claimants may receive an increased PUA weekly benefit amount up to a maximum—$240 in Arizona—if the claimant submits wage documentation within 21 days of applying.6,7 Federal regulations require states to determine and immediately pay a weekly benefit amount based on the claimants’ self-certification of eligibility and wages contained in the claimants’ application. Claimants who self-certify for more than the minimum weekly benefit amount are required to submit wage documentation within 21 days of applying for the additional weekly PUA benefit, and states are then required to immediately determine the accuracy of each claimant’s weekly benefit amount based on the claimant’s submitted wage documentation.6,7 For claimants who did not submit the required wage documentation within 21 days of applying, federal regulation requires states to immediately reduce the claimants’ future benefit payments to the minimum weekly benefit amount and consider PUA payments exceeding the minimum weekly benefit as overpayments.7 In addition, federal regulation requires states to take all reasonable measures under state and federal laws to recover overpayments to claimants, regardless of whether the overpayment resulted from error or fraud on the claimant’s part.8 However, in February 2022, federal regulation was issued that lists 7 scenarios under which states may waive recovery of CARES Act programs overpayments from claimants if the state determines specific criteria have been met, including that the claimant was not at fault.4 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms. (2 CFR §200.303).
Recommendations—DES should:
1. When identifying and establishing overpayments, determine if it will apply a waiver.
2. Bill claimants for overpayments and arrange payment plans with claimants, where required, and repay any recovered overpayments to the federal government, as required.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-108 and was initially reported in fiscal year 2020.
1 Arizona Auditor General. (2022). State of Arizona June 30, 2021, Single Audit Report. Phoenix, AZ. Retrieved 08/02/23 from https://www.azauditor.gov/sites/default/files/StateOfArizonaJune30_2021SingleAudit.pdf.
2 Congress passed several laws that essentially expanded unemployment insurance through new federally funded programs for a period of time to provide economic relief to individuals who were unable to work because of the COVID-19 pandemic and established the Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and Federal Pandemic Unemployment Compensation programs (FPUC). The PUA program, which provided unemployment compensation through September 6, 2021—or September 4, 2021, for the State of Arizona—to individuals who were not traditionally eligible for benefits under regular UI programs, such as those who were self-employed workers, independent contractors, and gig-economy workers; and those with limited work histories and certain other workers whose employment was affected by the COVID-19 pandemic. These programs provided claimants with a minimum weekly benefit, pursuant to each state’s unemployment compensation law, and anything above Arizona’s minimum weekly benefit of $117—up to $240 total per week in Arizona—would require wage verification. In addition, the FPUC program supplemented $600 to the weekly benefits an individual may receive under regular UI or PUA through July 31, 2020, provided they were eligible to participate in the UI programs. Again on December 26, 2020, the FPUC program supplemented $300 to the weekly benefits an individual may receive under regular UI or PUA through September 6, 2021 or September 4, 2021, in Arizona (Coronavirus Aid, Relief, and Economic Security [CARES] Act of 2020 [Public Law 116-136], Division N, Title II, Subtitle A {2020}; as amended by the Consolidated Appropriations Act of 2021 [Pub. L. 116-260], Title II, Subtitle A; as amended by the American Rescue Plan Act of 2021 [Pub. L.117–2], Title IX, Subtitle A, Sec. 9011 [2021]).
3 On January 8, 2021, the U.S. Department of Labor (DOL) issued updated guidance that permits states to waive recovery of CARES Act programs overpayments if they choose to apply waivers to the CARES Act programs if the state determines that: (i) the overpayment was without fault on the part of the individual and (ii) that repayment would be contrary to equity and good conscience. U.S. Department of Labor, Office of the Inspector General (2021). Unemployment Insurance Program Letter No. 16-20, Change 4. Retrieved 8/2/23 from https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2021/UIPL_16-20_Change_4_acc.pdf.
4 On February 7, 2022, the U.S. Department of Labor (DOL) issued updated guidance that lists 7 scenarios under which states may waive recovery of CARES Act programs overpayments if they choose to apply waivers to the CARES Act programs. The list includes 2 previously identified scenarios from the DOL guidance issued on May 5, 2021. U.S. Department of Labor, Office of the Inspector General (2022). Unemployment Insurance Program Letter No. 20-21, Change 1. Retrieved 8/2/23 from https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2022/UIPL_20-21_Change_1.pdf.
5 On March 27, 2020, the CARES Act, Section 2102(a)(3)(A), provided the criteria for which an individual self-certifies eligibility for PUA under the presidentially declared public health emergency resulting from the COVID-19 pandemic. The self-certification required claimants to self-declare that they were eligible for the PUA program and were able to work and available for work but unable to do so because of at least 1 specific, qualifying COVID-19-related reason. In addition, the CARES Act, §2102(h), applied the Disaster Unemployment Assistance program’s administrative requirements to PUA since PUA was similar to unemployment compensation provided under presidentially declared disasters.
6 20 CFR §625.6(e).
7 U.S. Department of Labor, Office of the Inspector General (2020). Unemployment Insurance Program Letter No. 16-20, Change 1, Attachment I, Question 20. Retrieved 8/2/23 from https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2020/UIPL_16-20_Change_1_Attachment_1.pdf.
8 20 CFR §625.14[a].
Assistance Listings number and name: 17.225 Unemployment Insurance
Award number and year: None
Federal agency: U.S. Department of Labor
Compliance requirement: Special tests and provisions—Benefits payments
Questioned costs: Not applicable
Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not meet the minimum percentage completion rates for its Benefit Accuracy Measurement (BAM) program to investigate cases of its regular unemployment insurance (UI) program’s paid and denied claims for the fiscal year ended June 30, 2022. Specifically, for batches 202127 through 202226 of paid and denied claims we tested, DES’ percentage completion rates for its paid and denied claims case investigations were as follows:
Percentage of paid claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 79.00% 44.79%
90 days of the batches’ week ending date 95.00% 65.83%
120 days of calendar year-end 98.00% 81.25%
Percentage of denied claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 60.00% 56.00%
90 days of the batches’ week ending date 85.00% 80.89%
120 days of calendar year-end 98.00% 91.56%
Effect—By not completing the required minimum percentage of paid and denied claims case investigations, DES’ BAM unit, which performs the investigations, is at an elevated risk of not detecting and reporting accurate error rates and the types and causes of benefit payment errors to DES’ management and the federal agency. Consequently, lacking complete and accurate information, DES management may not develop and implement plans for corrective actions to improve its benefit accuracy rates, as required by the federal agency.
Cause—DES reported that it failed to meet the required minimum percentage completion rates for its paid and denied claims case investigations because, since August 2019, its BAM unit maintained a 50 percent staff and turnover rate.
Criteria—The BAM program is the federal agency’s quality control system designed to assess the accuracy of UI program paid and denied claims, and states are required to investigate paid and denied claims as part of this program unless exempted from these requirements by the federal agency. Federal regulation requires DES to complete prompt and in-depth case investigations of paid and denied claims to determine if its administration of the UI benefit program is consistent with State and federal law (20 CFR §602.21[d]). Accordingly, federal guidance requires DES to complete its paid and denied claims case investigations as described in the tables presented above.1
Recommendation—DES should meet the required minimum percentage rates for completing UI program paid and denied claims case investigations by DES management allocating sufficient staffing and providing training to new staff of its BAM unit.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-110 and was initially reported in fiscal year 2020.
1 U.S. Department of Labor. (2009). Employment training handbook, No. 395, 5th Edition, Chapter VI, Completion of Cases and Timely Data Entry, page VI-11, Chapter VIII, Completion of CDA Cases and Timely Data Entry, pages VIII-2 and VIII-3. Retrieved 8/31/23 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2009/ETHandbook_395_Ch5_acc.pdf.
Assistance Listings number and name: 17.225 Unemployment Insurance
Award number and year: None
Federal agency: U.S. Department of Labor
Compliance requirement: Special tests and provisions—Benefits payments
Questioned costs: Not applicable
Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not meet the minimum percentage completion rates for its Benefit Accuracy Measurement (BAM) program to investigate cases of its regular unemployment insurance (UI) program’s paid and denied claims for the fiscal year ended June 30, 2022. Specifically, for batches 202127 through 202226 of paid and denied claims we tested, DES’ percentage completion rates for its paid and denied claims case investigations were as follows:
Percentage of paid claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 79.00% 44.79%
90 days of the batches’ week ending date 95.00% 65.83%
120 days of calendar year-end 98.00% 81.25%
Percentage of denied claims case investigations completed within: Required minimum percentage completed DES
percentage completed
60 days of the batches’ week ending date 60.00% 56.00%
90 days of the batches’ week ending date 85.00% 80.89%
120 days of calendar year-end 98.00% 91.56%
Effect—By not completing the required minimum percentage of paid and denied claims case investigations, DES’ BAM unit, which performs the investigations, is at an elevated risk of not detecting and reporting accurate error rates and the types and causes of benefit payment errors to DES’ management and the federal agency. Consequently, lacking complete and accurate information, DES management may not develop and implement plans for corrective actions to improve its benefit accuracy rates, as required by the federal agency.
Cause—DES reported that it failed to meet the required minimum percentage completion rates for its paid and denied claims case investigations because, since August 2019, its BAM unit maintained a 50 percent staff and turnover rate.
Criteria—The BAM program is the federal agency’s quality control system designed to assess the accuracy of UI program paid and denied claims, and states are required to investigate paid and denied claims as part of this program unless exempted from these requirements by the federal agency. Federal regulation requires DES to complete prompt and in-depth case investigations of paid and denied claims to determine if its administration of the UI benefit program is consistent with State and federal law (20 CFR §602.21[d]). Accordingly, federal guidance requires DES to complete its paid and denied claims case investigations as described in the tables presented above.1
Recommendation—DES should meet the required minimum percentage rates for completing UI program paid and denied claims case investigations by DES management allocating sufficient staffing and providing training to new staff of its BAM unit.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-110 and was initially reported in fiscal year 2020.
1 U.S. Department of Labor. (2009). Employment training handbook, No. 395, 5th Edition, Chapter VI, Completion of Cases and Timely Data Entry, page VI-11, Chapter VIII, Completion of CDA Cases and Timely Data Entry, pages VIII-2 and VIII-3. Retrieved 8/31/23 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2009/ETHandbook_395_Ch5_acc.pdf.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $8.5 million to 9 subrecipients during fiscal year 2022, or 6.6 percent of the Office’s $128.6 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the terms and program requirements.
Effect—The Office’s lack of required monitoring increases the risk that the $8.5 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-101 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.019 COVID-19 Coronavirus Relief Fund
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 2 quarterly reports found the following inaccuracies:
• An overstatement of contract expenditures of $6,906,186, or 59 percent, of the total $11.7 million of quarterly expenditures reported as of September 30, 2021.
• A cumulative understatement of $29,293,507, or 1.7 percent, of the total $1.7 billion of program expenditures reported as of September 30, 2021.
• An understatement of $43,698,295, or 2.4 percent, of the total $1.8 billion of program expenditures, which is the combined cumulative amount reported as of March 31, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared and reviewed the reports and were no longer employed by the Office, did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Additionally, those former staff members were not adequately trained on what information to gather to correctly classify the expenditures, and the Office’s policies and procedures did not require them to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately report quarterly its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts reported to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
3. Train employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the Office’s reporting policies and procedures.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports, if practicable, or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-103 and was initially reported in fiscal year 2021.
1 The CARES Act established the Coronavirus Relief Fund (CRF) and was enacted March 27, 2020. Federal guidance for implementing the CRF was established by the U.S. Treasury in April 2020, revised in June 2020, and further updated by frequently asked questions (FAQ) starting May 4, 2020. All the U.S. Treasury’s CRF guidance was finalized in the Federal Register (FR) on January 15, 2021 (FR Vol. 86, No. 10, Doc. 2021-00827). In addition, the U.S. Department of the Treasury, Office of the Inspector General, issued frequently asked questions regarding reporting (U.S. Department of the Treasury, Office of Inspector General. [2021]. Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), retrieved 4/17/2023 from https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf).
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.023 COVID-19 Emergency Rental Assistance Program
Award numbers and years: ERA-2101070596, January 8, 2021, through September 30, 2022;
ERA2-0165, May 10, 2021 through September 30, 2025
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following:
• The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report.
• The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report.
• The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them.
Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported.
Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines.
2. Follow its policies and procedures to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report.
3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process.
4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The ERA Program was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial ERA program is referred to as ERA 1. ERA 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2).
2 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—Nine State grantees paid $163.1 million to 495 subrecipients during fiscal year 2022, or 8.6 percent of the State’s $1.9 billion total federal expenditures for this federal program, but 3 of the 5 State grantees we tested did not perform all the required monitoring of the subrecipients’ activities or compliance with the federal award terms and program requirements. Specifically, the 3 State grantees identified below performed some monitoring during the year, which consisted only of reviewing some interim and the final financial and activity reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the federal award terms and program requirements.
State Grantee Amount awarded Number of subrecipients
Arizona Governor’s Office of Strategic Planning and Budgeting (Office) $113,947,556 222
Arizona Office of Tourism (AOT) 13,094,509 80
Arizona Supreme Court—Administrative Office of the Courts (AOC) 71,927 6
Total $127,113,992 308
Effect—The 3 State grantees’ lack of required monitoring increased the risk that the $127.1 million of program monies they disbursed to 308 subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Despite subrecipient-monitoring requirements being included in the federal regulations, 2 State grantees did not follow its existing subrecipient-monitoring policies and procedures, and 2 State grantees did not develop and implement subrecipient-monitoring policies and procedures to comply with these federal requirements. Specifically, Office management reported that its staffing levels were not sufficient to perform all the required subrecipient-monitoring procedures in its established policies and procedures. In addition, AOT management reported that it misunderstood the State guidance received, and it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Finally, AOC management reported that there was a misunderstanding on which State grantee was responsible for performing the subrecipient-monitoring of the monies they passed through to a subrecipient and consequently did not develop all the necessary subrecipient monitoring policies and procedures.
Criteria—Federal regulation requires State grantees to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, the Office established subrecipient-monitoring policies and procedures, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments (Grants Management Manual – Grantor, Chapter 8 – Award Monitoring). Lastly, federal regulation requires State grantees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—
1. The Office and AOT should ensure they perform required monitoring of their subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. The Office should allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
3. AOC should develop and implement policies and procedures and perform required monitoring of their subrecipients to ensure their compliance with award terms and program requirements. Specifically, AOC should:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) administration reported inaccurate program information to the federal agency in its quarterly reports when compared to the State’s records. Specifically, our testing of 3 quarterly reports found the following inaccuracies:
• An understatement of program expenditures of $47,737,991, or 5.6 percent, of the total $856.6 million of program expenditures reported for the period of March 3, 2021 to December 31, 2021.1
• A cumulative understatement of $42,794,231, or 4.2 percent, of the total $1 billion of program expenditures reported as of March 31, 2022.
• A cumulative understatement of $61,963,706, or 5 percent, of the total $1.2 billion of program expenditures, which is the combined cumulative amount reported as of June 30, 2022.
Effect—The Office’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to effectively monitor the Office’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success.
Cause—The Office staff members who initially prepared the reports and were no longer employed by the Office did not follow the Office’s established policies and procedures to prepare the reports and did not document the methodology used to compile them, which resulted in some of these errors. Although the Office reported it had reviewed the reports prior to submitting them to the federal grant portal, they were unable to provide documentation of this review occurring. Additionally, the Office’s policies and procedures did not require staff to reconcile the expenditure amounts to the Office’s accounting records, a procedure which could have detected the errors before the reports were submitted to the federal agency.
Criteria—Federal law, regulation, and guidance requires the Office to accurately and quarterly report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, the Office’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements and require an independent review of the reports prior to submitting them to the federal agency. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303).
Recommendations—The Office should:
1. Report accurate and complete program information to the federal agency.
2. Follow its reporting policies and procedures that require employees to perform and document independent reviews of all reports prior to submitting them to the federal agency.
3. Improve its reporting policies and procedures to require employees to:
a. Document the methodology used to compile and report program information.
b. Reconcile expenditure amounts to the Office’s accounting records and investigate any differences prior to submitting the report to the federal agency.
4. For reports the Office has already submitted to the federal agency that contain errors, revise and re-submit those reports if practicable or notify the federal agency of these reporting errors.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The U.S. Department of the Treasury established Compliance and Reporting Guidance, which included the requirements for the State’s quarterly Project and Expenditures Reports. Per the guidance, the State’s initial quarterly Project and Expenditure Report covered 3 calendar quarters from March 3, 2021 to December 31, 2021, while the State’s subsequent quarterly reports covered 1 calendar quarter. (U.S. Department of the Treasury. [2023, September]. Compliance and Report Guidance. Retrieved 10/13/23 from https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf).
2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing the SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. In addition, the U.S. Department of the Treasury, Office of the Inspector General issued frequently asked questions which included a section regarding reporting (U.S. Department of the Treasury, State and Local Fiscal Recovery Fund Interim Rule Frequently Asked Questions (Revised)). Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds
Award number and year: None
Federal agency: U.S. Department of the Treasury
Compliance requirement: Eligibility
Questioned costs: $10,000
Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000.
Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2
Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system.
Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should:
1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report.
2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02).
2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Subrecipient monitoring
Questioned costs: Unknown
Condition—The Arizona Governor’s Office of Strategic Planning and Budgeting (Office) awarded $12.3 million to 13 subrecipients during fiscal year 2022, or 38 percent of the Office’s $32.5 million total federal expenditures for this federal program, but did not perform all the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements. Specifically, the Office performed some monitoring during the year, which consisted only of reviewing financial and activity reports if submitted by the subrecipient; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—The Office’s lack of required monitoring increased the risk that the $12.3 million of program monies the Office awarded to subrecipients may not have been spent in accordance with the award terms and program requirements. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received.
Cause—Office management reported that it did not have enough staff to perform its various monitoring procedures, and instead, the Office performed only limited monitoring procedures. Specifically, the Office had policies and procedures to follow for performing the various monitoring procedures for its subrecipients, including how it should consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments. However, Office management reported that its staffing levels were not sufficient to perform all the required procedures.
Criteria—Federal regulations require the Office to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments; verifying single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures (2 CFR §§200.332[b] and [d – e]). Further, federal regulation requires the Office to establish and maintain effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by following their established policies and procedures to:
a. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on site reviews, selective audits, and/or other monitoring procedures.
b. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
c. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Office actions taken, if appropriate.
2. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate an individual to perform necessary subrecipient-monitoring procedures.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-105 and was initially reported in fiscal year 2021.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425C COVID-19 Education Stabilization Fund—Governor’s Emergency Education Relief (GEER) Fund
Award numbers and years: S425C200052, June 2, 2020 through September 30, 2021; S425C210052, January 8, 2021 through September 30, 2022
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Governor’s Office of Strategic Planning and Budgeting (Office) failed to report certain information on the federal government’s reporting system for $18.6 million of subawards it made to 10 subrecipients and 2 other State agencies under this program. Specifically, the Office awarded federal monies to these entities to provide education-related entities with emergency assistance to prevent, prepare for, and respond to COVID-19. However, the Office had not reported any required information about the subawards during fiscal year 2022, including the subaward organization names and subaward amounts and terms.
During fiscal year 2022, the Office spent $11.1 million of federal monies related to these subawards, or 34.2 percent of the total $32.5 million it expended for this federal program for the year.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Office’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, the Office was aware of the requirements, and the State’s accounting manual instructed State departments to follow them, the Office reported that the 2 employees who were responsible for preparing, submitting, and reviewing the report left the Office (i.e., 100 percent turnover in the program), and the replacement staff could not locate any documentation to support that the subaward data was reported on the federal government’s subaward reporting system during fiscal year 2022.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Office, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Office to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Office to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Allocate resources to ensure reporting requirements are met and appropriate supporting documentation is maintained.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-106 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number
and name: 84.425F COVID-19 Education Stabilization Fund—Institutional Portion
Award number and year: P425F200677, May 4, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirements: Allowable costs/cost principles and cash management
Questioned costs: $10,217,259
Condition—Contrary to federal guidance and regulations and Northern Arizona University’s (University) federal indirect cost agreement, for fiscal years 2020 through 2022, the University incorrectly calculated its federal indirect costs by applying its indirect cost rate to capital expenditures and lost revenues and requested and received reimbursement for direct program expenditures it did not incur.
Effect—The University overcharged $10,217,259 of unallowed costs to its HEERF program’s institutional portion for fiscal years 2020 through 2022, resulting in less monies available to spend on allowable program costs for addressing institutional needs, such as defraying costs associated with COVID-19 (including lost revenue and payroll). These unallowed costs included $2,473,496 in indirect costs related to capital expenditures, $7,449,036 in indirect costs related to lost revenues, and $294,727 for direct expenditures it did not incur and that comprised 8.5 percent of the University’s portion of the program’s total federal award expenditures for fiscal years 2020 through 2022. The University returned these unallowed costs to the U.S. Department of Education (ED) on August 18, 2023.
Cause—The University did not properly train the individual administering the program or require secondary reviews of indirect-cost calculations and reimbursement requests. Specifically, despite the requirements in its federal indirect cost rate agreement and ED’s guidance, the University’s administration reported that the individual performing the indirect-cost calculation was not properly trained on calculating indirect costs and therefore, did not realize that the indirect cost rate should not have been applied to capital expenditures and lost revenues. Also, the University did not follow written policy and have a second employee who was knowledgeable about the program review and approve the indirect-cost calculation for accuracy. Similarly, a second employee did not review reimbursement requests or reconcile program expenditures to its financial accounting system, and the University’s policy lacked such requirements.
Criteria—Federal guidance and regulations require the University to follow its federal indirect cost agreement to apply and calculate indirect costs allocated to federal programs at the specific percentages for specific costs that comprise the program’s base expenditures.1 The University’s federal indirect cost agreement and ED’s guidance does not allow the University to apply an indirect cost rate to its capital expenditures and estimated amount of lost revenue.2 In addition, University policy requires an independent review and approval of all transactions recorded in its accounting system, including indirect-cost calculations, to ensure that they are appropriate, accurate, and comply with applicable laws and regulations (Northern Arizona University Comptroller Manual, CMP 603). Further, federal regulation requires the University to use the reimbursement method to administer the program, whereby the Office is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[b][3]). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The University should:
1. Correctly calculate federal indirect costs by:
a. Training employees responsible for calculating federal program indirect costs to properly apply the award’s indirect cost rate to only allowable program expenditures as outlined in the indirect cost agreement and grant awards.
b. Following written policy for reviewing federal program transactions, including ensuring indirect-cost calculations are properly reviewed and approved.
2. Ensure only federal program costs incurred are requested for reimbursement by improving its written policy to require a second employee to reconcile program expenditures recorded on its financial accounting system to the reimbursement request before approving the request to be submitted to the federal grantor.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 U.S. Department of Education. (2021). Higher Education Emergency Relief Fund III—Frequently Asked Questions, Question 43. Retrieved 5/19/2023 from https://www2.ed.gov/about/offices/list/ope/arpfaq.pdf. U.S. Office of Management and Budget. (2021). Appendix III to 2 CFR Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determinations for Institutions of Higher Education. Retrieved 5/19/2023 from https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/appendix-Appendix%20III%20to%20Part%20200.
2 Executive Office of the President, Office of Management and Budget. 2 CFR Part 200, Appendix XI Compliance Supplement, page 4-84.425-ESF-38. (2002). Retrieved 5/19/2023 from https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf.
Assistance Listings number
and name: 84.425F COVID-19 Education Stabilization Fund—Institutional Portion
Award number and year: P425F200677, May 4, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirements: Allowable costs/cost principles and cash management
Questioned costs: $10,217,259
Condition—Contrary to federal guidance and regulations and Northern Arizona University’s (University) federal indirect cost agreement, for fiscal years 2020 through 2022, the University incorrectly calculated its federal indirect costs by applying its indirect cost rate to capital expenditures and lost revenues and requested and received reimbursement for direct program expenditures it did not incur.
Effect—The University overcharged $10,217,259 of unallowed costs to its HEERF program’s institutional portion for fiscal years 2020 through 2022, resulting in less monies available to spend on allowable program costs for addressing institutional needs, such as defraying costs associated with COVID-19 (including lost revenue and payroll). These unallowed costs included $2,473,496 in indirect costs related to capital expenditures, $7,449,036 in indirect costs related to lost revenues, and $294,727 for direct expenditures it did not incur and that comprised 8.5 percent of the University’s portion of the program’s total federal award expenditures for fiscal years 2020 through 2022. The University returned these unallowed costs to the U.S. Department of Education (ED) on August 18, 2023.
Cause—The University did not properly train the individual administering the program or require secondary reviews of indirect-cost calculations and reimbursement requests. Specifically, despite the requirements in its federal indirect cost rate agreement and ED’s guidance, the University’s administration reported that the individual performing the indirect-cost calculation was not properly trained on calculating indirect costs and therefore, did not realize that the indirect cost rate should not have been applied to capital expenditures and lost revenues. Also, the University did not follow written policy and have a second employee who was knowledgeable about the program review and approve the indirect-cost calculation for accuracy. Similarly, a second employee did not review reimbursement requests or reconcile program expenditures to its financial accounting system, and the University’s policy lacked such requirements.
Criteria—Federal guidance and regulations require the University to follow its federal indirect cost agreement to apply and calculate indirect costs allocated to federal programs at the specific percentages for specific costs that comprise the program’s base expenditures.1 The University’s federal indirect cost agreement and ED’s guidance does not allow the University to apply an indirect cost rate to its capital expenditures and estimated amount of lost revenue.2 In addition, University policy requires an independent review and approval of all transactions recorded in its accounting system, including indirect-cost calculations, to ensure that they are appropriate, accurate, and comply with applicable laws and regulations (Northern Arizona University Comptroller Manual, CMP 603). Further, federal regulation requires the University to use the reimbursement method to administer the program, whereby the Office is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[b][3]). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The University should:
1. Correctly calculate federal indirect costs by:
a. Training employees responsible for calculating federal program indirect costs to properly apply the award’s indirect cost rate to only allowable program expenditures as outlined in the indirect cost agreement and grant awards.
b. Following written policy for reviewing federal program transactions, including ensuring indirect-cost calculations are properly reviewed and approved.
2. Ensure only federal program costs incurred are requested for reimbursement by improving its written policy to require a second employee to reconcile program expenditures recorded on its financial accounting system to the reimbursement request before approving the request to be submitted to the federal grantor.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 U.S. Department of Education. (2021). Higher Education Emergency Relief Fund III—Frequently Asked Questions, Question 43. Retrieved 5/19/2023 from https://www2.ed.gov/about/offices/list/ope/arpfaq.pdf. U.S. Office of Management and Budget. (2021). Appendix III to 2 CFR Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determinations for Institutions of Higher Education. Retrieved 5/19/2023 from https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/appendix-Appendix%20III%20to%20Part%20200.
2 Executive Office of the President, Office of Management and Budget. 2 CFR Part 200, Appendix XI Compliance Supplement, page 4-84.425-ESF-38. (2002). Retrieved 5/19/2023 from https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf.
Assistance Listings number
and name: 84.425F COVID-19 Education Stabilization Fund—Institutional Portion
Award number and year: P425F200677, May 4, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirements: Allowable costs/cost principles and cash management
Questioned costs: $10,217,259
Condition—Contrary to federal guidance and regulations and Northern Arizona University’s (University) federal indirect cost agreement, for fiscal years 2020 through 2022, the University incorrectly calculated its federal indirect costs by applying its indirect cost rate to capital expenditures and lost revenues and requested and received reimbursement for direct program expenditures it did not incur.
Effect—The University overcharged $10,217,259 of unallowed costs to its HEERF program’s institutional portion for fiscal years 2020 through 2022, resulting in less monies available to spend on allowable program costs for addressing institutional needs, such as defraying costs associated with COVID-19 (including lost revenue and payroll). These unallowed costs included $2,473,496 in indirect costs related to capital expenditures, $7,449,036 in indirect costs related to lost revenues, and $294,727 for direct expenditures it did not incur and that comprised 8.5 percent of the University’s portion of the program’s total federal award expenditures for fiscal years 2020 through 2022. The University returned these unallowed costs to the U.S. Department of Education (ED) on August 18, 2023.
Cause—The University did not properly train the individual administering the program or require secondary reviews of indirect-cost calculations and reimbursement requests. Specifically, despite the requirements in its federal indirect cost rate agreement and ED’s guidance, the University’s administration reported that the individual performing the indirect-cost calculation was not properly trained on calculating indirect costs and therefore, did not realize that the indirect cost rate should not have been applied to capital expenditures and lost revenues. Also, the University did not follow written policy and have a second employee who was knowledgeable about the program review and approve the indirect-cost calculation for accuracy. Similarly, a second employee did not review reimbursement requests or reconcile program expenditures to its financial accounting system, and the University’s policy lacked such requirements.
Criteria—Federal guidance and regulations require the University to follow its federal indirect cost agreement to apply and calculate indirect costs allocated to federal programs at the specific percentages for specific costs that comprise the program’s base expenditures.1 The University’s federal indirect cost agreement and ED’s guidance does not allow the University to apply an indirect cost rate to its capital expenditures and estimated amount of lost revenue.2 In addition, University policy requires an independent review and approval of all transactions recorded in its accounting system, including indirect-cost calculations, to ensure that they are appropriate, accurate, and comply with applicable laws and regulations (Northern Arizona University Comptroller Manual, CMP 603). Further, federal regulation requires the University to use the reimbursement method to administer the program, whereby the Office is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[b][3]). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The University should:
1. Correctly calculate federal indirect costs by:
a. Training employees responsible for calculating federal program indirect costs to properly apply the award’s indirect cost rate to only allowable program expenditures as outlined in the indirect cost agreement and grant awards.
b. Following written policy for reviewing federal program transactions, including ensuring indirect-cost calculations are properly reviewed and approved.
2. Ensure only federal program costs incurred are requested for reimbursement by improving its written policy to require a second employee to reconcile program expenditures recorded on its financial accounting system to the reimbursement request before approving the request to be submitted to the federal grantor.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 U.S. Department of Education. (2021). Higher Education Emergency Relief Fund III—Frequently Asked Questions, Question 43. Retrieved 5/19/2023 from https://www2.ed.gov/about/offices/list/ope/arpfaq.pdf. U.S. Office of Management and Budget. (2021). Appendix III to 2 CFR Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determinations for Institutions of Higher Education. Retrieved 5/19/2023 from https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/appendix-Appendix%20III%20to%20Part%20200.
2 Executive Office of the President, Office of Management and Budget. 2 CFR Part 200, Appendix XI Compliance Supplement, page 4-84.425-ESF-38. (2002). Retrieved 5/19/2023 from https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
Award numbers and years: S425D210038, March 13, 2020 through September 30, 2023; S425U210038, March 13, 2020 through September 30, 2024
Federal agency: U.S. Department of Education
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Education (Department) failed to report complete and accurate information on the federal government’s reporting system related to its $2.4 million in ESSER II, $4.1 million in ARP ESSER, and $4.3 million in Title I subawards it made to local education agencies (LEAs) during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 50 subawards for these federal programs at the Department and found that, for 5, 5, and 6 subawards related to ESSER II, ARP ESSER, and Title I programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 5 ESSER II subawards, totaling over $2.4 million of the total $16.4 million of ESSER II subawards we tested in our sample.
o 4 ARP ESSER subawards, totaling over $4.0 million of the total $141.2 million of ARP ESSER subawards we tested in our sample.
o 6 Title I subawards, totaling over $4.3 million of the total $5.5 million of Title I subawards we tested in our sample.
• Required information within the required time frame for 1 ARP ESSER subaward tested, totaling $107,160, resulting in the report being submitted 2 months late.
Finally, the Department did not meet its quarterly reporting requirements for ESSER monies it spent during fiscal year 2022, since the ESSER reporting requirements were fulfilled through this same reporting on the federal government’s reporting system.
The tables below describe results for the subawards we tested.
Education Stabilization Fund—ESSER II
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
14 5 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$16,389,317 $2,405,866 $0 $0 $0
Total errors $2,405,866
Education Stabilization Fund—ARP ESSER
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
27 4 1 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$141,189,247 $4,033,816 $107,160 $0 $0
Total errors $4,140,976
Title I
Number of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
9 6 0 0 0
Dollar amount of subawards
Total subawards tested Subawards not reported Report not timely Subaward amount incorrect Subaward missing key elements
$5,451,449 $4,319,247 $0 $0 $0
Total errors $4,319,247
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal subaward spending decisions on the USAspending.gov website as required by federal laws and regulations. Further, the federal grantor, which relies on the Department’s data on the federal government’s reporting system for ESSER quarterly reports, lacked all needed information to effectively monitor the Department’s program administration. Therefore, the Department put the grantor at risk of not being able to carry out its oversight responsibilities and effectively evaluate the program’s success and prevent and detect fraud. Finally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $555.4 million, $251.0 million, and $314.3 million of federal monies related to the ESSER II, ARP ESSER, and Title I subawards, respectively, which comprised 95 percent, 99 percent, and 99 percent, respectively, of the Department’s $586.4 million, $254.1 million, and $318.5 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.¹ Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Also, federal laws require the Department to submit ESSER quarterly reports to the federal grantor unless the Department fulfills that requirement with more frequent reporting.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-118 and was initially reported in fiscal year 2021.
¹ The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
² For ESSER I, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (Public Law 116-136), Section 15011, requires the Department to submit quarterly reports to the U.S. Department of Education if it received more than $150,000 in federal awards under the CARES Act, although the quarterly reporting requirements are met if more frequent monthly reporting is performed, such as under the FFATA. These same reporting requirements applied to ESSER II in accordance with Sec. 303(f) of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and the Department’s award terms and conditions; however, this did not apply to ARP ESSER, as annual reporting was only required.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—The Arizona Health Care Cost Containment System (AHCCCS) Office of Inspector General and the Arizona Attorney General’s Office became aware of potential fraudulent billing practices including significant increases in billing for outpatient behavioral health services. These circumstances triggered a multi-agency review and investigation of potential fraud, waste and abuse. Ultimately, this led AHCCCS to connect the irregular billing of these services with alleged criminal activity targeting indigenous peoples and other vulnerable Arizonans. As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of Federal Fiscal Year 2020). AHCCCS’ contracted providers as of June 30, 2022 totaled 120,566. These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
The Credible Allegation of Fraud (CAF) payment suspensions noted above are associated with wide-ranging investigations into fraudulent Medicaid billing by the named providers. The investigations are ongoing. However, AHCCCS believes that credible evidence has been established that individuals were targeted and aggressively recruited with false promises of food, treatment, and housing, only to be taken to locations where providers billed for services that were not provided or were not appropriate or necessary. For example, providers billed for:
• Excessive hours of services in a 24-hour period for a single member.
• Multiple services for the same member at the same time.
• AHCCCS members who were not physically present (“ghost billing”).
• Services after a member’s date of death.
• Services that were not medically necessary.
Effect—As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of federal fiscal year 2020). These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
Once a credible allegation of fraud determination is made, AHCCCS is required to suspend all payments to a provider unless there is good cause not to while investigations are conducted. The credible allegation of fraud determination results from the agency’s preliminary investigation, and the agency must then make a fraud referral to the Arizona Attorney General’s Healthcare Fraud and Abuse Section or a federal law enforcement agency for a full investigation. During this time, providers may continue to bill AHCCCS for services provided, but any reimbursement to these providers is withheld pending the outcome of further investigation. Under State statute, providers are entitled to appeal a suspension placed by AHCCCS. AHCCCS is working closely with the Arizona Attorney General’s Healthcare Fraud and Abuse Section, the Federal Bureau of Investigation (FBI), the U.S. Department of Health and Human Services (HHS), the U.S. Attorney’s Office, the Internal Revenue Service (IRS), and local and tribal law enforcement to disrupt organized bad actors, apprehend them, and prosecute them to the full extent allowed by law. At present, the investigation is on-going, and AHCCCS is not currently able to estimate a total overpayment or amount of improper payments made to the providers.
This is deemed to be a material weakness in internal control of compliance.
Cause—AHCCCS did not have sufficient controls in place to safeguard against unnecessary utilization of care and services and to prevent fraud. Additionally, AHCCCS did not have sufficient procedures for the ongoing pre- and post-payment review of behavioral health claims. While AHCCCS’ claims processing system uses the CMS required claim edit protocols to look for improperly billed claims as noted in the National Correct Coding Initiative (NCCI) and such edit protocols are updated regularly per CMS requirements, AHCCCS did not have sufficient additional claim edits that were necessary for behavioral health claims. For example, AHCCCS did not have sufficient edits to restrict the inappropriate use of per diem codes or restrict some behavioral health codes from being billed for the same member on the same date of service. Further, AHCCCS did not have sufficient controls in which claims were reviewed by a medical professional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Credible Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
AHCCCS must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. AHCCCS must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. AHCCCS may conduct this review directly or may contract with an independent entity (42 CFR §§456.5, 456.22 and 456.23).
Recommendation—We recommend that AHCCCS review and enhance existing policies and procedures and related controls to ensure sufficient processes and controls are in place to safeguard against unnecessary utilization of care and services and to prevent fraud. We also recommend that AHCCCS institute an ongoing and appropriate pre- and post-payment review of behavioral health claims. Likewise, AHCCCS should increase their level of scrutiny over certain behavioral health provider types.
We further recommend that AHCCCS examine the existing Medicaid payment system and implement system-wide improvements. The improvements should include the establishment of additional reporting to flag concerning claims for prepayment review, setting of billing thresholds and establishing prepayment review for various behavioral health claim types. We also recommend that AHCCCS establish sufficient controls in which claims are reviewed by a medical processional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Management of AHCCCS concurs in part with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—The Arizona Health Care Cost Containment System (AHCCCS) Office of Inspector General and the Arizona Attorney General’s Office became aware of potential fraudulent billing practices including significant increases in billing for outpatient behavioral health services. These circumstances triggered a multi-agency review and investigation of potential fraud, waste and abuse. Ultimately, this led AHCCCS to connect the irregular billing of these services with alleged criminal activity targeting indigenous peoples and other vulnerable Arizonans. As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of Federal Fiscal Year 2020). AHCCCS’ contracted providers as of June 30, 2022 totaled 120,566. These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
The Credible Allegation of Fraud (CAF) payment suspensions noted above are associated with wide-ranging investigations into fraudulent Medicaid billing by the named providers. The investigations are ongoing. However, AHCCCS believes that credible evidence has been established that individuals were targeted and aggressively recruited with false promises of food, treatment, and housing, only to be taken to locations where providers billed for services that were not provided or were not appropriate or necessary. For example, providers billed for:
• Excessive hours of services in a 24-hour period for a single member.
• Multiple services for the same member at the same time.
• AHCCCS members who were not physically present (“ghost billing”).
• Services after a member’s date of death.
• Services that were not medically necessary.
Effect—As of August 23, 2023, a total of 317 providers have been suspended from Medicaid payments (since the start of federal fiscal year 2020). These provider payment suspensions are known as Credible Allegations of Fraud (CAF) suspensions.
Once a credible allegation of fraud determination is made, AHCCCS is required to suspend all payments to a provider unless there is good cause not to while investigations are conducted. The credible allegation of fraud determination results from the agency’s preliminary investigation, and the agency must then make a fraud referral to the Arizona Attorney General’s Healthcare Fraud and Abuse Section or a federal law enforcement agency for a full investigation. During this time, providers may continue to bill AHCCCS for services provided, but any reimbursement to these providers is withheld pending the outcome of further investigation. Under State statute, providers are entitled to appeal a suspension placed by AHCCCS. AHCCCS is working closely with the Arizona Attorney General’s Healthcare Fraud and Abuse Section, the Federal Bureau of Investigation (FBI), the U.S. Department of Health and Human Services (HHS), the U.S. Attorney’s Office, the Internal Revenue Service (IRS), and local and tribal law enforcement to disrupt organized bad actors, apprehend them, and prosecute them to the full extent allowed by law. At present, the investigation is on-going, and AHCCCS is not currently able to estimate a total overpayment or amount of improper payments made to the providers.
This is deemed to be a material weakness in internal control of compliance.
Cause—AHCCCS did not have sufficient controls in place to safeguard against unnecessary utilization of care and services and to prevent fraud. Additionally, AHCCCS did not have sufficient procedures for the ongoing pre- and post-payment review of behavioral health claims. While AHCCCS’ claims processing system uses the CMS required claim edit protocols to look for improperly billed claims as noted in the National Correct Coding Initiative (NCCI) and such edit protocols are updated regularly per CMS requirements, AHCCCS did not have sufficient additional claim edits that were necessary for behavioral health claims. For example, AHCCCS did not have sufficient edits to restrict the inappropriate use of per diem codes or restrict some behavioral health codes from being billed for the same member on the same date of service. Further, AHCCCS did not have sufficient controls in which claims were reviewed by a medical professional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Credible Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
AHCCCS must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. AHCCCS must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. AHCCCS may conduct this review directly or may contract with an independent entity (42 CFR §§456.5, 456.22 and 456.23).
Recommendation—We recommend that AHCCCS review and enhance existing policies and procedures and related controls to ensure sufficient processes and controls are in place to safeguard against unnecessary utilization of care and services and to prevent fraud. We also recommend that AHCCCS institute an ongoing and appropriate pre- and post-payment review of behavioral health claims. Likewise, AHCCCS should increase their level of scrutiny over certain behavioral health provider types.
We further recommend that AHCCCS examine the existing Medicaid payment system and implement system-wide improvements. The improvements should include the establishment of additional reporting to flag concerning claims for prepayment review, setting of billing thresholds and establishing prepayment review for various behavioral health claim types. We also recommend that AHCCCS establish sufficient controls in which claims are reviewed by a medical processional pre- and post-payment to assess if the claim was medically necessary and to assess if the codes being used were excessive and age appropriate.
Management of AHCCCS concurs in part with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—Arizona Health Care Cost Containment System (AHCCCS) did not identify and perform a preliminary investigation of potential incidents of fraud or abuse committed by members and providers on a timely basis.
Effect—Untimely fraud or abuse incident investigations could result in AHCCCS making unnecessary payments and compromise its ability to investigate cases. This is deemed to be a significant deficiency in internal control of compliance.
Cause—Management has reported to us that insufficient investigative staff impacted AHCCCS’ ability to investigate potential fraud or abuse incidents in a timely manner. Additionally, AHCCCS has not established clear time frames in which referrals received are assigned for investigation.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Creditable Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
Recommendations—We recommend that AHCCCS conduct a workload/cost analysis to evaluate whether its funding and staffing levels are sufficient to timely investigate member and provider fraud or abuse incidents. We also recommend that AHCCCS establish a policy that includes clear time frames in which referrals received are assigned for investigation and closely monitor compliance with the policy.
Management of AHCCCS concurs with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Cluster name: Medicaid Cluster
Assistance Listings number and name: 93.778 Medical Assistance Program
93.778 COVID-19 Medical Assistance Program
Award number and year: 11-W-00275/09, July 1, 2021 through June 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Special Tests and Provisions—Utilization Control and Program Integrity
Questioned costs: Unknown
Condition—Arizona Health Care Cost Containment System (AHCCCS) did not identify and perform a preliminary investigation of potential incidents of fraud or abuse committed by members and providers on a timely basis.
Effect—Untimely fraud or abuse incident investigations could result in AHCCCS making unnecessary payments and compromise its ability to investigate cases. This is deemed to be a significant deficiency in internal control of compliance.
Cause—Management has reported to us that insufficient investigative staff impacted AHCCCS’ ability to investigate potential fraud or abuse incidents in a timely manner. Additionally, AHCCCS has not established clear time frames in which referrals received are assigned for investigation.
Criteria—AHCCCS is required to provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, AHCCCS must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring Creditable Allegations of Fraud (CAF) cases to law enforcement officials (42 CFR §§455, 456, and 1002). Credible allegations of provider fraud must be referred to the state Medicaid Fraud Control Unit (MFCU) or an appropriate law enforcement agency in states with no certified MFCU (42 CFR §455.21).
Recommendations—We recommend that AHCCCS conduct a workload/cost analysis to evaluate whether its funding and staffing levels are sufficient to timely investigate member and provider fraud or abuse incidents. We also recommend that AHCCCS establish a policy that includes clear time frames in which referrals received are assigned for investigation and closely monitor compliance with the policy.
Management of AHCCCS concurs with the finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.268 Immunization Cooperative Agreements
93.268 COVID-19 Immunization Cooperative Agreements
Award number and year: NH23IP922599, July 1, 2019 through June 30, 2024
Assistance Listings numbers and names: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases
93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases
Award number and year: NU50CK000511, August 1, 2019 through July 31, 2024
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Health Services (Department) failed to report required information on the federal government’s reporting system related to its $12.9 million in Immunization Cooperative Agreements (Immunization) and $102.8 million in Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) subawards it made to subrecipients during fiscal year 2022. As shown in the bullets and tables below, we tested a total sample of 49 subawards for these federal programs at the Department and found that, for 28 and 11 subawards related to Immunization and ELC programs, respectively, the Department failed to report the following:
• Any required information about the subawards, including the subaward organization names and subaward amounts and terms, as follows:
o 13 Immunization subawards, totaling over $6.1 million of the total $42.8 million of Immunization subawards we tested in our sample.
o 9 ELC subawards, totaling over $33.8 million of the total $129.1 million of ELC subawards we tested in our sample.
• Required information within the time frame for:
o 4 Immunization subawards tested, totaling $1.8 million, resulting in the reports being submitted 3 months late.
o 2 ELC subawards tested, totaling $69.0 million, resulting in the reports being submitted 4 and 12 months late.
• Correct subaward amounts for 3 Immunization subawards tested, totaling $128,062.
• Any required key elements such as subaward number, action date, and description for 3 Immunization subawards we tested, totaling $878,345.
• Correct key elements for 5 Immunization subawards we tested, totaling over $4.0 million.
The table below describes results for the subawards we tested.
Immunization (93.268)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
30 13 4 3 3 5
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$42,846,925 $6,160,922 $1,770,868 $128,062 $878,345 $4,000,569
Total errors $12,938,766
ELC (93.323)
Number of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
19 9 2 0 0 0
Dollar amount of subawards
Total subawards tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements Subaward with other incorrect key elements
$129,124,079 $33,782,859 $69,036,821 $0 $0 $0
Total errors $102,819,680
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations. Additionally, the Department is at risk that this finding applies to other federal programs it administers.
During fiscal year 2022, the Department spent $21.8 million and $41.1 million of federal monies related to the Immunization and ELC subawards, respectively, which comprised 14 percent and 21 percent, respectively, of the Department’s $155.4 million and $200.1 million total federal expenditures the Department spent for these particular programs.
Cause—Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, the Department did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, the Department’s program administrators did not always communicate with the employee responsible for reporting to the federal government’s reporting system when new subawards and modifications to subawards required reporting. Finally, the Department did not require a post-upload review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, the Department was unaware of the errors.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for these programs.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance.
3. Implement procedures requiring independent reviews to:
a. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system.
b. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed.
4. Implement a procedure for Department program administrators to communicate subaward activities, such as new subawards or modifications to existing subawards, to those employees responsible for reporting the Department’s subaward actions to the federal government’s reporting system.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families
93.558 COVID-19 Temporary Assistance for Needy Families
Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021;
2201AZTANF, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: $6,754
Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for:
• $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087.
• $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements.
• $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable.
Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services.
The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively.
Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1
Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract.
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements.
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations.
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability.
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise.
6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services.
7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families
93.558 COVID-19 Temporary Assistance for Needy Families
Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021;
2201AZTANF, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: $6,754
Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for:
• $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087.
• $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements.
• $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable.
Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services.
The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively.
Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1
Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract.
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements.
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations.
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability.
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise.
6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services.
7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families
93.558 COVID-19 Temporary Assistance for Needy Families
Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021;
2201AZTANF, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: $6,754
Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for:
• $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087.
• $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements.
• $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable.
Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services.
The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively.
Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1
Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes.
Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract.
2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements.
3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations.
4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability.
5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise.
6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services.
7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance
93.568 COVID-19 Low-Income Home Energy Assistance
Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020;
2101AZLIEA and 2101AZE5C6, 2021;
2201AZLIEA and 2101AZLIE4, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Earmarking
Questioned costs: $211,916
Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916.
Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1
Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation.
Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Division should:
1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs.
2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation.
3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies.
4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.658 Foster Care—Title IV-E
93.658 COVID-19 Foster Care—Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021;
2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: Unknown
Condition—The Department of Child Safety (Department) paid 5 childcare institutions that provided foster care services $514,154 in federal monies for foster care maintenance payments despite their ineligibility for payments and, contrary to federal regulations, allowed them to care for children before the Department completed all required child safety considerations, which included performing background checks on the childcare institutions’ employees. Specifically, for 5 of 11 childcare institutions tested, the Department did not complete 9 of 43 employee name-based criminal records background checks, also referred to as central registry background checks, until 1 to 28 days after the employees’ hire dates.
Effect—Although none of the 9 employees’ name-based criminal records checks returned a criminal record, the Department placed children in State care at potential risk by allowing some childcare institutions’ employees to care for children despite the Department not having completed the employees’ name-based criminal records background checks. Further, the Department violated federal regulations by making foster care maintenance payments to 5 childcare institutions before determining if they were eligible to receive the payments.
Cause—Due to the COVID-19 pandemic, the federal grantor allowed the Department to delay fingerprint background checks until it was safely able to do, but the Department misapplied that federal guidance to the name-based criminal records background checks.1 In addition, the Department used checklist tools to ensure compliance with these background checks that did not align with the Department’s policies and federal and State requirements for completing them, making it difficult for the Department to ensure the background checks were conducted as required.
Criteria—The Department’s policies and procedures require it to complete background checks on childcare institutions’ employees and ensure the background checks are conducted prior to the employees’ hire date (Department of Child Safety, Administrative Policy 15-32). Federal regulation requires the Department to address safety considerations of a childcare institution’s employees before the childcare institution can be considered eligible to receive maintenance payments under the program (45 CFR §1356.30). Specifically, federal and State laws require the Department to complete the following 2 background checks on all childcare institution employees, whether paid or unpaid: (1) name-based criminal records background checks (the central registry background checks) and (2) fingerprint-based background checks of national crime information databases. The federal grantor allowed a delay for the fingerprint-based background check requirement during the public health emergency resulting from the COVID-19 pandemic.1 Federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Complete the required name-based criminal records background checks on all childcare institutions’ employees before allowing employees to care for children and making foster care maintenance payments to childcare institutions.
2. Review and improve its existing procedures, including its checklist tools, to ensure they are consistent with the Department’s policies and federal and State requirements.
3. Seek additional guidance from the federal grantor, as needed, to implement administrative flexibilities to federal requirements and ensure that policies and procedures are modified and communicated to Department employees accordingly.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-113 and was initially reported in fiscal year 2021.
1 Federal and State laws require the Department to perform both central registry background checks and fingerprint-based background checks of all childcare institutions’ employees, respectively (42 USC §671[a][20] and A.R.S. §§8-804 and 41-141). During the public health emergency resulting from the COVID-19 pandemic, the federal grantor issued a letter dated April 15, 2020, granting flexibility for the fingerprinting requirement, which allowed DCS to complete the fingerprint-based background checks as soon as it could safely do so, providing that it conducted all available name-based criminal background checks in accordance with federal and State laws (U.S. Department of Health and Human Services, Administration for Children And Families. [2020]. Stafford Act Flexibility for Criminal Background Checks and Monthly Caseworker Visits in Childs Residence. Retrieved 8/23/2023 from https://www.acf.hhs.gov/sites/default/files/documents/cb/stafford_act.pdf).
Assistance Listings numbers and names: 93.658 Foster Care—Title IV-E
93.658 COVID-19 Foster Care—Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021;
2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: Unknown
Condition—The Department of Child Safety (Department) paid 5 childcare institutions that provided foster care services $514,154 in federal monies for foster care maintenance payments despite their ineligibility for payments and, contrary to federal regulations, allowed them to care for children before the Department completed all required child safety considerations, which included performing background checks on the childcare institutions’ employees. Specifically, for 5 of 11 childcare institutions tested, the Department did not complete 9 of 43 employee name-based criminal records background checks, also referred to as central registry background checks, until 1 to 28 days after the employees’ hire dates.
Effect—Although none of the 9 employees’ name-based criminal records checks returned a criminal record, the Department placed children in State care at potential risk by allowing some childcare institutions’ employees to care for children despite the Department not having completed the employees’ name-based criminal records background checks. Further, the Department violated federal regulations by making foster care maintenance payments to 5 childcare institutions before determining if they were eligible to receive the payments.
Cause—Due to the COVID-19 pandemic, the federal grantor allowed the Department to delay fingerprint background checks until it was safely able to do, but the Department misapplied that federal guidance to the name-based criminal records background checks.1 In addition, the Department used checklist tools to ensure compliance with these background checks that did not align with the Department’s policies and federal and State requirements for completing them, making it difficult for the Department to ensure the background checks were conducted as required.
Criteria—The Department’s policies and procedures require it to complete background checks on childcare institutions’ employees and ensure the background checks are conducted prior to the employees’ hire date (Department of Child Safety, Administrative Policy 15-32). Federal regulation requires the Department to address safety considerations of a childcare institution’s employees before the childcare institution can be considered eligible to receive maintenance payments under the program (45 CFR §1356.30). Specifically, federal and State laws require the Department to complete the following 2 background checks on all childcare institution employees, whether paid or unpaid: (1) name-based criminal records background checks (the central registry background checks) and (2) fingerprint-based background checks of national crime information databases. The federal grantor allowed a delay for the fingerprint-based background check requirement during the public health emergency resulting from the COVID-19 pandemic.1 Federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Complete the required name-based criminal records background checks on all childcare institutions’ employees before allowing employees to care for children and making foster care maintenance payments to childcare institutions.
2. Review and improve its existing procedures, including its checklist tools, to ensure they are consistent with the Department’s policies and federal and State requirements.
3. Seek additional guidance from the federal grantor, as needed, to implement administrative flexibilities to federal requirements and ensure that policies and procedures are modified and communicated to Department employees accordingly.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-113 and was initially reported in fiscal year 2021.
1 Federal and State laws require the Department to perform both central registry background checks and fingerprint-based background checks of all childcare institutions’ employees, respectively (42 USC §671[a][20] and A.R.S. §§8-804 and 41-141). During the public health emergency resulting from the COVID-19 pandemic, the federal grantor issued a letter dated April 15, 2020, granting flexibility for the fingerprinting requirement, which allowed DCS to complete the fingerprint-based background checks as soon as it could safely do so, providing that it conducted all available name-based criminal background checks in accordance with federal and State laws (U.S. Department of Health and Human Services, Administration for Children And Families. [2020]. Stafford Act Flexibility for Criminal Background Checks and Monthly Caseworker Visits in Childs Residence. Retrieved 8/23/2023 from https://www.acf.hhs.gov/sites/default/files/documents/cb/stafford_act.pdf).
Assistance Listings numbers and names: 93.658 Foster Care—Title IV-E
93.658 COVID-19 Foster Care—Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021;
2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: Unknown
Condition—The Department of Child Safety (Department) paid 5 childcare institutions that provided foster care services $514,154 in federal monies for foster care maintenance payments despite their ineligibility for payments and, contrary to federal regulations, allowed them to care for children before the Department completed all required child safety considerations, which included performing background checks on the childcare institutions’ employees. Specifically, for 5 of 11 childcare institutions tested, the Department did not complete 9 of 43 employee name-based criminal records background checks, also referred to as central registry background checks, until 1 to 28 days after the employees’ hire dates.
Effect—Although none of the 9 employees’ name-based criminal records checks returned a criminal record, the Department placed children in State care at potential risk by allowing some childcare institutions’ employees to care for children despite the Department not having completed the employees’ name-based criminal records background checks. Further, the Department violated federal regulations by making foster care maintenance payments to 5 childcare institutions before determining if they were eligible to receive the payments.
Cause—Due to the COVID-19 pandemic, the federal grantor allowed the Department to delay fingerprint background checks until it was safely able to do, but the Department misapplied that federal guidance to the name-based criminal records background checks.1 In addition, the Department used checklist tools to ensure compliance with these background checks that did not align with the Department’s policies and federal and State requirements for completing them, making it difficult for the Department to ensure the background checks were conducted as required.
Criteria—The Department’s policies and procedures require it to complete background checks on childcare institutions’ employees and ensure the background checks are conducted prior to the employees’ hire date (Department of Child Safety, Administrative Policy 15-32). Federal regulation requires the Department to address safety considerations of a childcare institution’s employees before the childcare institution can be considered eligible to receive maintenance payments under the program (45 CFR §1356.30). Specifically, federal and State laws require the Department to complete the following 2 background checks on all childcare institution employees, whether paid or unpaid: (1) name-based criminal records background checks (the central registry background checks) and (2) fingerprint-based background checks of national crime information databases. The federal grantor allowed a delay for the fingerprint-based background check requirement during the public health emergency resulting from the COVID-19 pandemic.1 Federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Complete the required name-based criminal records background checks on all childcare institutions’ employees before allowing employees to care for children and making foster care maintenance payments to childcare institutions.
2. Review and improve its existing procedures, including its checklist tools, to ensure they are consistent with the Department’s policies and federal and State requirements.
3. Seek additional guidance from the federal grantor, as needed, to implement administrative flexibilities to federal requirements and ensure that policies and procedures are modified and communicated to Department employees accordingly.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-113 and was initially reported in fiscal year 2021.
1 Federal and State laws require the Department to perform both central registry background checks and fingerprint-based background checks of all childcare institutions’ employees, respectively (42 USC §671[a][20] and A.R.S. §§8-804 and 41-141). During the public health emergency resulting from the COVID-19 pandemic, the federal grantor issued a letter dated April 15, 2020, granting flexibility for the fingerprinting requirement, which allowed DCS to complete the fingerprint-based background checks as soon as it could safely do so, providing that it conducted all available name-based criminal background checks in accordance with federal and State laws (U.S. Department of Health and Human Services, Administration for Children And Families. [2020]. Stafford Act Flexibility for Criminal Background Checks and Monthly Caseworker Visits in Childs Residence. Retrieved 8/23/2023 from https://www.acf.hhs.gov/sites/default/files/documents/cb/stafford_act.pdf).
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: Not applicable
Condition—The Department of Child Safety (Department) awarded $5,963,987 to 15 subrecipients during fiscal year 2022, or 4.5 percent of the Department’s $131,628,177 total federal expenditures for this federal program but did not perform the required monitoring of the subrecipients’ activities or of their compliance with the award terms and program requirements. The Department performed some monitoring during the year, which consisted only of reviewing annual progress reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—There is an increased risk that the $5,963,987 of program monies the Department awarded to the 15 subrecipients may not have been spent in accordance with the award terms and program requirements. Also, since the Department’s award terms require subrecipients to use program monies to supplement, and not supplant, costs of legal representation in child welfare court cases, the lack of monitoring could potentially have increased the risk that these monies may have supplanted these legal costs or may not have been spent to obtain adequate legal representation.
Cause—Although the Department had developed written policies and procedures in February 2022 for performing the various monitoring procedures for its subrecipients, including how it considers and assesses risk of each subrecipient and carries out required and various other monitoring procedures based on those risk assessments, it had not implemented them due to staff turnover.
Criteria—Federal regulations require the Department to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and appropriate monitoring activities based on those risk assessments; verifying single audits were conducted timely; reviewing financial and performance reports, following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (45 CFR §§75.352[b] and [d – f]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by prioritizing implementing policies and procedures to:
1. Assess the risk of each subrecipient’s noncompliance and carry out appropriate monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
3. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-116 and was initially reported in fiscal year 2021.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: Not applicable
Condition—The Department of Child Safety (Department) awarded $5,963,987 to 15 subrecipients during fiscal year 2022, or 4.5 percent of the Department’s $131,628,177 total federal expenditures for this federal program but did not perform the required monitoring of the subrecipients’ activities or of their compliance with the award terms and program requirements. The Department performed some monitoring during the year, which consisted only of reviewing annual progress reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—There is an increased risk that the $5,963,987 of program monies the Department awarded to the 15 subrecipients may not have been spent in accordance with the award terms and program requirements. Also, since the Department’s award terms require subrecipients to use program monies to supplement, and not supplant, costs of legal representation in child welfare court cases, the lack of monitoring could potentially have increased the risk that these monies may have supplanted these legal costs or may not have been spent to obtain adequate legal representation.
Cause—Although the Department had developed written policies and procedures in February 2022 for performing the various monitoring procedures for its subrecipients, including how it considers and assesses risk of each subrecipient and carries out required and various other monitoring procedures based on those risk assessments, it had not implemented them due to staff turnover.
Criteria—Federal regulations require the Department to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and appropriate monitoring activities based on those risk assessments; verifying single audits were conducted timely; reviewing financial and performance reports, following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (45 CFR §§75.352[b] and [d – f]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by prioritizing implementing policies and procedures to:
1. Assess the risk of each subrecipient’s noncompliance and carry out appropriate monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
3. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-116 and was initially reported in fiscal year 2021.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Subrecipient monitoring
Questioned costs: Not applicable
Condition—The Department of Child Safety (Department) awarded $5,963,987 to 15 subrecipients during fiscal year 2022, or 4.5 percent of the Department’s $131,628,177 total federal expenditures for this federal program but did not perform the required monitoring of the subrecipients’ activities or of their compliance with the award terms and program requirements. The Department performed some monitoring during the year, which consisted only of reviewing annual progress reports; however, those monitoring procedures alone were not sufficient to evaluate whether subrecipients used program monies in accordance with the award terms and program requirements.
Effect—There is an increased risk that the $5,963,987 of program monies the Department awarded to the 15 subrecipients may not have been spent in accordance with the award terms and program requirements. Also, since the Department’s award terms require subrecipients to use program monies to supplement, and not supplant, costs of legal representation in child welfare court cases, the lack of monitoring could potentially have increased the risk that these monies may have supplanted these legal costs or may not have been spent to obtain adequate legal representation.
Cause—Although the Department had developed written policies and procedures in February 2022 for performing the various monitoring procedures for its subrecipients, including how it considers and assesses risk of each subrecipient and carries out required and various other monitoring procedures based on those risk assessments, it had not implemented them due to staff turnover.
Criteria—Federal regulations require the Department to monitor subrecipients, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and appropriate monitoring activities based on those risk assessments; verifying single audits were conducted timely; reviewing financial and performance reports, following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. Those federal regulations also provide that monitoring procedures may include providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (45 CFR §§75.352[b] and [d – f]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should ensure it performs required monitoring of its subrecipients and their compliance with the award terms and program requirements by prioritizing implementing policies and procedures to:
1. Assess the risk of each subrecipient’s noncompliance and carry out appropriate monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures.
2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award.
3. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-116 and was initially reported in fiscal year 2021.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Child Safety (Department) failed to report certain information on the federal government’s reporting system for $5.9 million in subawards it made to 11 Arizona counties under this program. Specifically, the Department awarded federal monies to the counties to supplement, but not supplant, costs of legal representation in child welfare court cases. However, the Department had not reported any required information about the subawards, including subaward organization names and subaward amounts and terms, during fiscal year 2022 and since fiscal year 2020 when the Department began awarding program monies.
During fiscal year 2022, the Department spent $5.9 million of federal monies related to these subawards, or 4.5 percent of the Department’s $131.6 million total federal expenditures for this federal program. It spent $14.3 million of federal monies related to these subawards in the 2 prior fiscal years.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, Department staff reported they were not aware of the program’s reporting requirements in fiscal year 2022 because of an oversight.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and ensure Department employees are aware of all program requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-117 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Child Safety (Department) failed to report certain information on the federal government’s reporting system for $5.9 million in subawards it made to 11 Arizona counties under this program. Specifically, the Department awarded federal monies to the counties to supplement, but not supplant, costs of legal representation in child welfare court cases. However, the Department had not reported any required information about the subawards, including subaward organization names and subaward amounts and terms, during fiscal year 2022 and since fiscal year 2020 when the Department began awarding program monies.
During fiscal year 2022, the Department spent $5.9 million of federal monies related to these subawards, or 4.5 percent of the Department’s $131.6 million total federal expenditures for this federal program. It spent $14.3 million of federal monies related to these subawards in the 2 prior fiscal years.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, Department staff reported they were not aware of the program’s reporting requirements in fiscal year 2022 because of an oversight.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and ensure Department employees are aware of all program requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-117 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings numbers and names: 93.658 Foster Care―Title IV-E
93.658 COVID-19 Foster Care―Title IV-E
Award numbers and years: 2101AZFOST, October 1, 2020 through September 30, 2021; 2201AZFOST, October 1, 2021 through September 30, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Reporting
Questioned costs: Not applicable
Condition—Contrary to federal laws and regulations and the State’s accounting manual, the Department of Child Safety (Department) failed to report certain information on the federal government’s reporting system for $5.9 million in subawards it made to 11 Arizona counties under this program. Specifically, the Department awarded federal monies to the counties to supplement, but not supplant, costs of legal representation in child welfare court cases. However, the Department had not reported any required information about the subawards, including subaward organization names and subaward amounts and terms, during fiscal year 2022 and since fiscal year 2020 when the Department began awarding program monies.
During fiscal year 2022, the Department spent $5.9 million of federal monies related to these subawards, or 4.5 percent of the Department’s $131.6 million total federal expenditures for this federal program. It spent $14.3 million of federal monies related to these subawards in the 2 prior fiscal years.
Effect—The State’s stakeholders and the public did not have access to transparent and timely information about the Department’s federal award spending decisions on the USAspending.gov website as required by federal laws and regulations.
Cause—Although the program’s reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State’s accounting manual instructed State departments to follow them, Department staff reported they were not aware of the program’s reporting requirements in fiscal year 2022 because of an oversight.
Criteria—The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require the Department, as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the FFATA Subaward Reporting System no later than month-end of the month following the subaward action so that the information can be displayed to the public on the website, USAspending.gov.1 Specifically, the federal Uniform Guidance requires the Department to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State’s accounting manual requires the Department to perform this reporting for federal awards (State of Arizona Accounting Manual, Topic 70: Grants, Section 45). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (45 CFR §75.303).
Recommendations—The Department should:
1. Immediately report on the FFATA Subaward Reporting System the required information for its subawards for this program.
2. Follow the State’s accounting manual for reporting subaward actions exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, and ensure Department employees are aware of all program requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
This finding is similar to prior-year finding 2021-117 and was initially reported in fiscal year 2021.
1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting on the FFATA Subaward Reporting System at FSRS—Federal Funding Accountability and Transparency Act Subaward Reporting System.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.425E COVID-19—Education Stabilization Fund—Student Aid Portion
Award number and year: P425E202475, April 25, 2020 through June 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Activities allowed or unallowed
Questioned costs: $15,021
Cluster name: Student Financial Assistance Cluster
Assistance Listings numbers and names: 84.007 Federal Supplemental Educational Opportunity Grants
84.033 Federal Work-Study Program
84.038 Federal Perkins Loan Program—Federal Capital Contributions
84.063 Federal Pell Grant Programs
84.268 Federal Direct Student Loans
84.379 Teacher Education Assistance for College and Higher Education Grants (TEACH Grants)
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Education
Assistance Listings numbers and names: 93.364 Nursing Student Loans
93.925 Scholarships for Health Professions Students from Disadvantaged Backgrounds
Award numbers and year: Various, 2022
Federal agency: U.S. Department of Health and Human Services
Compliance requirement: Eligibility
Questioned costs: $55,214
Total questioned costs: $70,235
Condition—Contrary to federal regulation and the U.S. Department of Education’s (ED) guidance, Northern Arizona University’s Office of Scholarships and Financial Aid (Office) failed to use new internet protocol (IP) techniques to verify 5 distance education students’ identities and awarded federal financial assistance to fraudulently enrolled students in a distance education program during the period of July 1, 2021 through June 30, 2022. Specifically, the Office determined that fraudsters stole 5 identities and manipulated the University’s student enrollment application process to receive federal student financial assistance and higher education emergency relief awards. The fraudsters used and falsified stolen information to apply for and enroll in a distance education program. Upon acceptance, the fraudsters applied for federal student financial assistance and higher education emergency relief awards through ED’s Free Application for Federal Student Aid process. The fraudsters then participated in the amount of online interaction necessary to establish participation in the distance education program and secured disbursements of SFA funds under the Office’s procedures. The Office was not alerted of the fraud until one of the victims questioned the outstanding loans on their student account with the University.1
Effect—The Office awarded $90,309 in Direct Loans and $15,641 in higher education emergency relief grants and disbursed $35,715 directly to fraudsters during the period of July 1, 2021 through June 30, 2022, for the 5 distance education students’ identities it did not verify and disbursed the remaining credit balances to the fraudsters after tuition and fees were paid.1 Also, as of this report’s issuance, the Office reported that it awarded an additional $138,135 and disbursed to the students $91,030 in Direct Loans to fraudsters for the period July 1, 2022 through June 30, 2023, for 2 identities that previously received funding and 6 new distance education students’ identities it did not initially verify. There is a risk that additional fraudulent identity theft payments were awarded to fraudulently enrolled students to which the Office was not alerted. The University has updated and repaid to ED the loan and grant funds for 2 of the 11 stolen identities but has not resolved the remaining 9 stolen identities to ensure that the victims are not charged inappropriately.
Cause—Despite ED’s guidance to identify and prevent distance education program fraud, the University stated that the Office did not implement more advanced anti-fraud measures in its distance education procedures because they felt existing controls focusing on email addresses were sufficient to detect fraud.2 However, the Office’s procedures lacked automated student information system protocols to identify instances where several students used the same Internet Protocol (IP) address to apply and participate in distance education programs. Also, the Office did not modify its disbursement rules for students participating exclusively in distance education programs to reduce the amount of monies that fraudsters can receive, which could include delaying disbursement of funds until the student has participated in the program for a longer period, or disbursing funds to students more frequently rather than one payment at the beginning of the period.
Criteria—Federal regulation requires institutions to have processes in place to establish that a student who registers for distance education programs is the same student who academically engages in the program (34 CFR §602.17[g]). In addition, ED provided guidance on actions that institutions can take to identify and prevent distance education program fraud, including implementing automated student information system protocols and modifying disbursement rules for students participating exclusively in distance programs.2 Although preventing and detecting all fraud may not be practical, developing, implementing, and maintaining measures to address fraud risks identified in administering federal student financial assistance programs is an essential part of internal control standards. For example, the Standards for Internal Control in Federal Government, issued by the Comptroller General of the United States, can be integral to helping prevent or detect payments to fraudsters who commit identity theft.3 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—The Office should:
1. Develop and implement anti-fraud measures, such as automated student Internet Protocols (IP) verifications and delayed disbursement rules, to help verify distance education students’ identities prior to disbursing federal student financial assistance and higher education emergency relief awards.
2. Conduct a review of prior fiscal years to determine if there were additional fraudulently enrolled students that received student financial assistance and if fraudulent loans and grants were awarded, notify both ED and the victims.
3. Repay all federal loans and grants that have been identified and eliminate all fictitious loans on each victim’s accounts with ED.
4. Continue to work with law enforcement and ED, as necessary, to report and prosecute fraud occurring within its federal programs of which the Office becomes aware.
The University’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
1 The University filed a police report with the University’s Police Department on October 13, 2022, after being notified by the original victim. Subsequently, the University discovered 4 additional fraudulent identities and notified each victim within 3 to 5 days. In addition, the University notified the U.S. Department of Education’s Office of the Inspector General (OIG) on June 16, 2023, and provided the OIG evidence and documentation about the fraudulent federal student financial assistance awards, as required by federal guidance (U.S. Department of Education—Federal Student Aid Partners. (2023.) Federal student aid handbook, Chapter 5—Referral of Fraud Cases. Retrieved 8/18/2023 from https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/application-and-verification-guide/ch5-special-cases.).
2 U.S. Department of Education. (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020). Retrieved 8/22/2023 from (GEN-11-17) Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION (Updated 8/21/2020) | Knowledge Center.
3 U.S. Government Accountability Office (GAO). (2014). Standards for internal control in the federal government. Retrieved 8/18/2023 from https://www.gao.gov/assets/670/665712.pdf.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Assistance Listings number and name: 84.010 Title I Grants to Local Educational Agencies
Award numbers and years: S010A180003, July 1, 2018 through September 30, 2019;
S010A190003, July 1, 2019 through September 30, 2020;
S010A200003, July 1, 2020 through September 30, 2021;
S010A210003, July 1, 2021 through September 30, 2022
Assistance Listings numbers and names: 84.425C COVID-19 Governor’s Emergency Education Relief (GEER) Fund
84.425D COVID-19 Education Stabilization Fund—Elementary and Secondary School Emergency Relief (ESSER) Fund
84.425R COVID19 Education Stabilization Fund—Emergency Assistance to Non-Public Schools (EANS)
84.425U COVID-19 Education Stabilization Fund—American Rescue Plan—ESSER Fund (ARP ESSER)
84.425V COVID-19 Education Stabilization Fund—American Rescue Plan—Emergency Assistance to Non-Public Schools (ARP EANS)
84.425W COVID-19 Education Stabilization Fund—American Rescue Plan—Elementary and Secondary School Emergency Relief—Homeless Children and Youth
Award numbers and years: ISA-ERMT-21-5008, July 1, 2020 through June 30,2021;
ISA-GEER-ADE-070121-04, July 1, 2021 through June 30, 2023;
ISA-GEER-ADE-070121-02, July 1, 2021 through June 30, 2023;
S425D200038, May 11, 2020 through September 30, 2021;
S425D210038, March 13, 2020 through September 30, 2023;
S425R210003, April 23, 2021 through September 30, 2023;
S425U210038, March 13, 2020 through September 30, 2024;
S425V210003, February 18, 2022 through September 30, 2024;
S425W210003, April 23, 2021 through September 30, 2023
Federal agency: U.S. Department of Education
Compliance requirement: Not applicable
Questioned costs: Not applicable
Condition—Contrary to federal regulation and the State’s accounting manual, the Department of Education’s (Department) initially prepared schedule of expenditures of federal awards (SEFA), which totaled nearly $2.5 billion, contained significant errors that required correction for it to be reliable for determining federal programs to be audited and for inclusion in the State of Arizona’s SEFA. Specifically, the Department:
• Understated expenditures for Title I—Grants to States (ALN 84.010) by over $318.3 million.
• Overstated expenditures for the Education Stabilization Fund (ALN 84.245) by over $96.2 million.
• Misstated total federal award expenditures by nearly $2.6 billion (gross error amount including those described above) for 42 of its 52 programs, which resulted in net overstatement of $37.5 million.
• Misstated total expenditures passed through to subrecipients by nearly $3.5 billion (gross error amount) for 37 of its 52 programs, which resulted in a net overstatement of $8 million.
• Inaccurately reported program titles for 14 programs and the wrong federal agency for 1 program.
Effect—Although the Department corrected the significant misstatements we identified, the Department’s misstatements on its SEFA placed the State’s SEFA at risk of being misstated and potentially wasting public monies because misstated amounts could result in auditors unnecessarily auditing the wrong federal programs. Specifically, the Department’s misstatements on its SEFA could have resulted in it providing inaccurate information to the Arizona Department of Administration (ADOA) for inclusion in the State’s SEFA, which would have resulted in those who rely on the information it contains being misinformed, including ADOA, the Legislature, and federal agencies and pass-through grantors. This finding was not a result of internal control deficiencies of individual federal programs and accordingly, did not have a direct and material effect on the reporting requirements of the federal programs the Department administers.
Cause—Although the Department is responsible for preparing a schedule of its federal award expenditures for inclusion in the State’s SEFA for the State’s single audit, it did not follow the requirements in the State’s accounting manual to compile all the federal award information necessary to prepare an accurate and complete SEFA. In addition, the Department’s reviews performed on its initially prepared SEFA were not effective to detect and correct these significant errors because the reviewers lacked training on the SEFA’s required content and how to obtain it.
Criteria—Federal Uniform Guidance regulation requires the Department to separately identify in its accounts all federal awards received and expended and prepare an accurate and complete SEFA that reports its federal award expenditures for the year (2 Code of Federal Regulations [CFR] §§200.302 and 200.510). Further, the State’s accounting manual states that in order to reduce the number of deficiencies identified during the State-wide single audit, to better comply with the updated provisions of the federal Single Audit Act, and to increase the efficiency in compiling the State-wide SEFA, the revised formatting guidelines set forth in State’s accounting manual must be adhered to by any agency submitting an agency SEFA to ADOA’s General Accounting Office (State of Arizona Accounting Manual, Topic 70: Grants, Section 15). Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).
Recommendations—To help ensure that it prepares a SEFA that is accurate and complete, the Department should:
1. Follow the State’s accounting manual requirements to compile all the federal award information necessary to prepare its SEFA, including the sources from which the information is to be obtained.
2. Require an effective and independent review of its SEFA to help ensure the SEFA is accurate and complete and complies with federal Uniform Guidance requirements prior to submitting it for audit.
3. Train those responsible for preparing and reviewing the SEFA on the State’s accounting manual requirements.
The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.