2022-055 The Health Care Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and Children?s Health Insurance Program. Assistance Listing Number and Title: 93.767 Children?s Health Insurance Program 93.767 COVID-19 Children?s Health Insurance Program 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers 93.777 COVID-19 State Survey and Certification of Health Care Providers and Suppliers 93.778 Medical Assistance Program 93.778 COVID-19 Medical Assistance Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2005WA5021; 2105WAINCT; 2105WAIMPL; 2105WA5MAP; 2105WA5ADM; 1905WA5021; 2105WA5021; 2205WA5021; 2205WA5MAP; 2205WA5ADM Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Special Tests and Provisions ? Provider Eligibility (Screening and Enrollment) Known Questioned Cost Amount: $612,277 Background The Health Care Authority administers both Medicaid and the Children?s Health Insurance Program (CHIP). Medicaid is a jointly funded state and federal partnership providing coverage for about 2.3 million eligible low-income Washington residents who otherwise might go without medical care. Medicaid is Washington?s largest public assistance program and usually accounts for about one third of the state?s federal expenditures. CHIP provides health coverage for almost 90,000 children and pregnant people in families with incomes too high to qualify for Medicaid. During fiscal year 2022, the Medicaid program spent more than $17.6 billion in federal and state funds, and CHIP spent more than $229 million in federal and state funds. The Authority ensures medical providers for both programs are eligible to provide services for clients. Providers must continue to meet eligibility requirements to receive payments under the programs. Washington had more than 127,000 participating providers in fiscal year 2022. During that time, the Authority paid more than $6.6 billion to providers for direct client services under the programs. The Authority is responsible for performing screening measures appropriate for the provider type at application and initial enrollment. Federal regulations require state Medicaid agencies to revalidate the enrollment of all Medicaid and CHIP providers at least every five years. To meet this requirement, the Authority has implemented an automated revalidation notification process that is supposed to send a letter to providers in time for them to be revalidated before the end of the five-year period. Federal law also requires state Medicaid agencies to check federal databases at least monthly to confirm the identity and exclusion status of providers, as well as any person with ownership, controlling interest, or acting as an agent or managing employee of the provider. The provider enrollment and revalidation processes are similar. The first step in both processes is to determine the provider?s screening risk level. A provider can be designated as one of three risk levels: limited, moderate or high. Each risk level requires progressively greater scrutiny of the provider before it can be enrolled or revalidated. For providers enrolled with both Medicare and Medicaid, state Medicaid agencies must assign them to the same or higher risk category applicable under Medicare. Additionally, certain provider behaviors require them to be moved to a higher screening level. The following are the required screening procedures for all risk types: ? Verify that the provider meets applicable federal regulations or state requirements for the provider type before making an enrollment determination ? Conduct license verifications, including for licenses in states other than where the provider is enrolling ? Conduct database checks to ensure providers continue to meet the enrollment criteria for their provider type. Such database checks include the National Plan and Provider Enumeration System, List of Excluded Individuals/Entities, Excluded Parties List System, and Death Master File index. If state Medicaid agencies assess providers at a moderate or high risk, they are required to conduct onsite visits for those that did not have one as part of their Medicare enrollment. Federal regulations require a high-risk provider, or a person with a 5 percent or more direct or indirect ownership in the provider, to receive a fingerprint-based criminal background check. The deadline to fully implement a fingerprint-based criminal background check was July 1, 2018. The Authority is also responsible for ensuring that providers obtain the proper signed attestations and disclosures. For servicing only providers, a direct link must be made to a billing provider that has an active Core Provider Agreement (CPA) on file. A CPA contains the required attestation and disclosures of the billing provider to allow for the payment of medical claims. To ensure the Authority has completed all applicable screening and enrollment or revalidation steps before enrolling or revalidating providers, staff members use checklists for each enrollment and revalidation. The staff member signs and dates the checklist to indicate the provider is eligible to render services and receive payments. In response to the COVID-19 pandemic, the Authority obtained flexibilities under blanket waivers approved by the Centers for Medicare and Medicaid Services (CMS), which were effective March 1, 2020, through the end of the emergency declaration period. These included the waiving of provider application fees and fingerprint-based criminal background checks. The CMS waivers also allowed for expedited processing of any new or pending provider applications, as well as the postponement of all revalidation actions until November 1, 2020. Also in response to the COVID-19 pandemic, the Authority?s Chief Medical Officer approved a blanket waiver for the backdating of all providers effective dates, as allowed by CMS and Washington Administrative Code. This waiver allows providers to submit claims for services provided before their enrollment and revalidation applications are approved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In prior audits, we reported the Authority did not have adequate internal controls over and did not comply with requirements to ensure it revalidated providers every five years and met screening requirements. The prior finding numbers were 2021-047, 2020-046, 2019-048, 2018-042, 2017-033, and 2016-035. Description of Condition The Authority did not have adequate internal controls over and did not comply with federal provider eligibility requirements for the Medicaid and CHIP programs. During the audit period, the Authority processed 10,959 new provider enrollments and was required to perform ongoing eligibility determinations for 114,427 active providers. We used a statistical sampling method to randomly select and examine 59 newly enrolled providers and 59 active providers to determine if the Authority properly screened them based on their enrollment status and correctly determined their eligibility status. Of the 118 providers examined, we found seven instances for six providers (5 percent) when the Authority did not take the appropriate actions to ensure providers met eligibility requirements. Specifically, we found: ? Staff enrolled three providers without a valid CPA on file. Because the providers were not covered by a CPA, they were improperly enrolled. ? Staff did not conduct a proper license check for three providers. A proper license check for these providers would have led staff to identify that their license was either expired or did not cover the enrollment period, and, therefore, were ineligible. ? Staff did not properly screen one provider based on a moderate risk level. The improper screening checklist was used and the risk level was not properly addressed. To determine if the Authority had revalidated providers every five years or had taken actions to deactivate providers, we used computer-assisted audit techniques to analyze the entire population of 2,049 providers that should have been revalidated or deactivated during the fiscal year. We found the Authority?s internal controls were insufficient and resulted in none of the 2,049 providers (100 percent) being revalidated before the due date. We determined 648 providers were subsequently revalidated, and the Authority backdated them. We also determined 1,242 providers were deactivated, but the Authority did not process the deactivation until at least 30 days after the eligibility end date. There were an additional 159 providers that should have been deactivated, but the Authority did not take actions to deactivate or revalidate them. Federal law requires the Authority to check federal databases at least monthly to confirm the identity and exclusion status of providers. However, the automated system that performs these checks and notifies the Authority of possible problems with providers was not operating correctly, and it frequently provided incorrect information. Management decided to ignore this information and stopped performing the monthly database checks. The Authority did review the results of the check once during the fiscal year, in July of 2021. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Although the Authority has established internal controls over screening and enrolling providers, they were ineffective for preventing or detecting noncompliance. Management also did not ensure staff consistently followed the procedures in place. Additionally, the automated revalidation notification was inadequate for ensuring the Authority complied with the five-year revalidation requirement. To comply with this requirement, the Authority should notify providers about their revalidations and ensure they are started and completed before the due date. Our audit found that the Authority?s automated system is designed to notify providers of their revalidations one day after the due date. Due to this inadequate system design, all provider revalidations were completed after their due dates. Although management directed staff to stop performing the monthly database checks because of issues with the automated system, they did not reinstate the procedures used before the system was implemented so staff could continue verifying providers? identity and exclusion status. Effect of Condition and Questioned Costs By not conducting required licensing, screening, and enrollment processes in a timely manner, the Authority is at risk of not detecting or preventing ineligible providers from providing services to clients and receiving federal Medicaid and CHIP funds. Payments to providers who are ineligible are unallowable, and the Authority could be required to repay the grantor for these payments. We identified the following payments made to ineligible providers: Audit Area Known questioned costs (state and federal) Known questioned costs (federal portion only) Likely improper payments (state and federal) Likely improper payments (federal portion only) New Providers $7,092 $3,985 $1,317,224 $740,280 Deactivated Providers $302,372 $292,051 $399,999 $351,698 Not Revalidated or Deactivated $509,702 $316,241 Total $819,166 $612,277 $1,717,223 $1,091,978 In addition to the questioned costs in the table above, we also identified $26,148,599 in costs at risk for those providers whose revalidations were backdated. If the providers had not been revalidated, these costs would also be considered questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Strengthen internal controls to ensure providers are adequately screened, licensed, enrolled, and eligible to provide and bill for services ? Implement internal controls designed to bring it into material compliance with the provider revalidation process Authority?s Response The Authority partially concurs with the finding. The Authority agrees that ProviderOne sends revalidation notifications one day after the due date rather than before the due date to allow time for the revalidation process. A system revision is in process, and we expect this issue to be resolved by the beginning of 2024. The Authority does not concur with the remainder of the auditor?s findings. The auditor provided the final exceptions and this finding at the close of the audit. The document with the final exceptions did not contain enough information for the Authority to adequately review the results of the auditor?s testing or the methodology used to calculate questioned costs. The time allotted to the Authority to review the testing results, seek clarification, and provide an agency response was not sufficient to analyze the results and provide an informed response. Due to the lack of complete information and time provided, the Authority is unable to agree or disagree with the results of the audit. Finally, on March 19, 2020, the Centers for Medicare & Medicaid Services (CMS) approved Washington?s request for an 1135 COVID-19 Emergency Declaration Blanket Waiver for Health Care Providers, effective through the end of the federal Public Health Emergency. This waiver temporarily suspended provider enrollment and revalidation requirements. Should the Authority agree with any or all of the results from the audit, it would not concur that questioned costs be returned because provider enrollment and revalidations requirements were temporarily suspended by CMS. Auditor?s Remarks We provided the Authority with preliminary exceptions on December 20, 2022 for ?Not Revalidated or Deactivated Providers? and on December 30, 2022 for ?New Providers?, ?Active Providers?, and ?Deactivated Providers?. The Authority provided additional information on January 31, 2023 that cleared some of the exceptions. We provided final exceptions on March 3, 2023 which included the unique transaction identifier for each exception. The Authority requested that we perform additional testing for the ?Deactivated Providers? on March 15th. The draft finding was provided to the Authority on April 14, 2023 and the Authority provided their response on May 3rd. Despite several years of the known system weaknesses, the Authority has not updated the system or implemented compensating processes to ensure providers are eligible to provide Medicaid and Chip services. Regarding the 1135 COVID-19 Emergency Declaration Blanket Waiver, the Authority informed us that beginning October 1, 2020, Authority management had reinstated the majority of provider eligibility requirements that had been waived. We reaffirm our finding with questioned costs and will follow up on the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 42 CFR Part 433, State Fiscal Administration, Subpart F ? Refunding of Federal Share of Medicaid Overpayments to Providers, describes the requirements for identifying, reporting, collecting, and remitting Medicaid overpayments. Title 42 CFR section 438 subpart H ? Additional Program Integrity Safeguards, states in part: Section 438.602 State responsibilities. (a) Monitoring contractor compliance. Consistent with ? 438.66, the State must monitor the MCO?s, PIHP?s, PAHP?s, PCCM?s or PCCM entity?s compliance, as applicable, with ?? 438.604, 438.606, 438.608, 438.610, 438.230, and 438.808. (b) Screening and enrollment and revalidation of providers. (1) The State must screen and enroll, and periodically revalidate, all network providers of MCOs, PIHPs, and PAHPs, in accordance with the requirements of part 455, subparts B and E of this chapter. This requirement extends to PCCMs and PCCM entities to the extent the primary care case manager is not otherwise enrolled with the State to provide services to FFS beneficiaries. This provision does not require the network provider to render services to FFS beneficiaries. (2) MCOs, PIHPs, and PAHPs may execute network provider agreements pending the outcome of the process in paragraph (b)(1) of this section of up to 120 days, but must terminate a network provider immediately upon notification from the State that the network provider cannot be enrolled, or the expiration of one 120 day period without enrollment of the provider, and notify affected enrollees. (c) Ownership and control information. The State must review the ownership and control disclosures submitted by the MCO, PIHP, PAHP, PCCM or PCCM entity, and any subcontractors as required in ? 438.608(c). (d) Federal database checks. Consistent with the requirements at ? 455.436 of this chapter, the State must confirm the identity and determine the exclusion status of the MCO, PIHP, PAHP, PCCM or PCCM entity, any subcontractor, as well as any person with an ownership or control interest, or who is an agent or managing employee of the MCO, PIHP, PAHP, PCCM or PCCM entity through routine checks of Federal databases. This includes the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the System for Award Management (SAM), and any other databases as the State or Secretary may prescribe. These databases must be consulted upon contracting and no less frequently than monthly thereafter. If the State finds a party that is excluded, it must promptly notify the MCO, PIHP, PAHP, PCCM, or PCCM entity and take action consistent with ? 438.610(c). Title 42 CFR section 455 Subpart B ? Disclosure of Information by Providers and Fiscal Agents, states in part: Section 455.104 Disclosure by Medicaid providers and fiscal agents: Information on ownership and control. (a) Who must provide disclosures. The Medicaid agency must obtain disclosures from disclosing entities, fiscal agents, and managed care entities. (b) What disclosures must be provided. The Medicaid agency must require that disclosing entities, fiscal agents, and managed care entities provide the following disclosures: (1) (i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. The address for corporate entities must include as applicable primary business address, every business location, and P.O. Box address. (ii) Date of birth and Social Security Number (in the case of an individual). (iii) Other tax identification number (in the case of a corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) or in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest. (2) Whether the person (individual or corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling; or whether the person (individual or corporation) with an ownership or control interest in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling. (3) The name of any other disclosing entity (or fiscal agent or managed care entity) in which an owner of the disclosing entity (or fiscal agent or managed care entity) has an ownership or control interest. (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). (c) When the disclosures must be provided ? (1) Disclosures from providers or disclosing entities. Disclosure from any provider or disclosing entity is due at any of the following times: (i) Upon the provider or disclosing entity submitting the provider application. (ii) Upon the provider or disclosing entity executing the provider agreement. (iii) Upon request of the Medicaid agency during the re-validation of enrollment process under ? 455.414. (iv) Within 35 days after any change in ownership of the disclosing entity. (2) Disclosures from fiscal agents. Disclosures from fiscal agents are due at any of the following times: (i) Upon the fiscal agent submitting the proposal in accordance with the State?s procurement process. (ii) Upon the fiscal agent executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the fiscal agent. (3) Disclosures from managed care entities. Disclosures from managed care entities (MCOs, PIHPs, PAHPs, and HIOs), except PCCMs are due at any of the following times: (i) Upon the managed care entity submitting the proposal in accordance with the State?s procurement process. (ii) Upon the managed care entity executing the contract with the State. (iii) Upon renewal or extension of the contract. (iv) Within 35 days after any change in ownership of the managed care entity. (4) Disclosures from PCCMs. PCCMs will comply with disclosure requirements under paragraph (c)(1) of this section. (d) To whom must the disclosures be provided. All disclosures must be provided to the Medicaid agency. (e) Consequences for failure to provide required disclosures. Federal financial participation (FFP) is not available in payments made to a disclosing entity that fails to disclose ownership or control information as required by this section. Title 42 CFR section 455 Subpart E ? Provider Screening and Enrollment, states in part: Section 455.410 Enrollment and screening of providers (a) The State Medicaid agency must require all enrolled providers to be screened under to this subpart. (b) The State Medicaid agency must require all ordering or referring physicians or other professionals providing services under the State plan or under a waiver of the plan to be enrolled as participating providers. (c) The State Medicaid agency may rely on the results of the provider screening performed by any of the following: (1) Medicare contractors. (2) Medicaid agencies or Children?s Health Insurance Programs of other States. Section 455.412 Verification of provider licenses The State Medicaid agency must ? (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. Section 455.414 Revalidation of enrollment The State Medicaid agency must revalidate the enrollment of all providers regardless of provider type at least every 5 years. Section 455.436 Federal database checks The State Medicaid agency must do all of the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c) (1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. Section 455.450 Screening levels for Medicaid providers. A State Medicaid agency must screen all initial applications, including applications for a new practice location, and any applications received in response to a re-enrollment or revalidation of enrollment request based on a categorical risk level of ?limited,? ?moderate,? or ?high.? If a provider could fit within more than one risk level described in this section, the highest level of screening is applicable. (a) Screening for providers designated as limited categorical risk. When the State Medicaid agency designates a provider as a limited categorical risk, the State Medicaid agency must do all of the following: (1) Verify that a provider meets any applicable Federal regulations, or State requirements for the provider type prior to making an enrollment determination. (2) Conduct license verifications, including State licensure verifications in States other than where the provider is enrolling, in accordance with ? 455.412. (3) Conduct database checks on a pre- and post-enrollment basis to ensure that providers continue to meet the enrollment criteria for their provider type, in accordance with ? 455.436. (b) Screening for providers designated as moderate categorical risk. When the State Medicaid agency designates a provider as a ?moderate? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? screening requirements described in paragraph (a) of this section. (2) Conduct on-site visits in accordance with ? 455.432. (c) Screening for providers designated as high categorical risk. When the State Medicaid agency designates a provider as a ?high? categorical risk, a State Medicaid agency must do both of the following: (1) Perform the ?limited? and ?moderate? screening requirements described in paragraphs (a) and (b) of this section. (2) (i) Conduct a criminal background check; and (ii) Require the submission of a set of fingerprints in accordance with ? 455.434. (d) Denial or termination of enrollment. A provider, or any person with 5 percent or greater direct or indirect ownership in the provider, who is required by the State Medicaid agency or CMS to submit a set of fingerprints and fails to do so may have its - (1) Application denied under ? 455.434; or (2) Enrollment terminated under ? 455.416. (e) Adjustment of risk level. The State agency must adjust the categorical risk level from ?limited? or ?moderate? to ?high? when any of the following occurs: (1) The State Medicaid agency imposes a payment suspension on a provider based on credible allegation of fraud, waste or abuse, the provider has an existing Medicaid overpayment, or the provider has been excluded by the OIG or another State?s Medicaid program within the previous 10 years. (2) The State Medicaid agency or CMS in the previous 6 months lifted a temporary moratorium for the particular provider type and a provider that was prevented from enrolling based on the moratorium applies for enrollment as a provider at any time within 6 months from the date the moratorium was lifted. Medicaid Provider Enrollment Compendium (MPEC) B. Enrolled Provider?s Payment Eligibility for Retroactive Dates of Service The practice of ?backdating? enrollment involves approving an enrollment with a retroactive billing date. This practice allows a provider, once enrolled, to submit claims for services dated prior to the date upon which the SMA approved the enrollment. As discussed earlier, provider screening enables states to identify ineligible parties before they are able to enroll and start billing. Components of provider screening include database and licensure checks, and may also include site visits and FCBCs. To the extent a SMA approves the enrollment of a new provider and permits the provider to bill for services dated prior to applicable screening(s), this practice creates risk. For example, if a newly enrolling provider is subject to a site visit, and the SMA completes a site visit for the provider but nonetheless permits the provider to bill for services dated prior to the date on which the site visit occurred, there is risk the prov
2022-063 The Health Care Authority did not have adequate controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Community Mental Health Services were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.958 Block Grants for Community Mental Health Services 93.958 COVID-19 Block Grants for Community Mental Health Services Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B09SM082638-01; 6B09SM082638-01M001; 6N09SM082638-01M004; 6B09SM082638-01M002; 6B09SM082638-01M003; 6N09SM083829-01M001; 1B09SM083829-01; 1B09SM086035-01; 6B09SM086035-01M001; 6B09SM086035-01M002; 6B09SM086035-01M003; 1B09SM085384-01; 1B09SM085912-01; 1B09SM083998-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $8,668,982 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grant for Community Mental Health Service (MHBG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to provide mental health treatment and crisis service to adults diagnosed with serious mental illness and children diagnosed with serious emotional disturbances. In fiscal year 2022, the Authority spent about $31.7 million in federal program funds, $20.5 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for MHBG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to MHBG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the amount of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the MHBG program were allowable and met period of performance requirements. During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $8,668,982. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition While the Authority has written procedures for the year-end estimated accruals, management did not ensure that only obligations within the state fiscal year were included. Furthermore, the Authority does not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure that its MHBG expenditures are for allowable activities and within the period of performance. We identified $8,668,982 in known questioned costs related to the estimated year-end accruals. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that MHBG expenditures are for allowable activities and within the period of performance. Expenditures reported on MHBG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $8,668,982 questioned costs associated with year-end accruals. HCA notes that the $8,668,982 questioned costs, do not meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments, which states impart: (2) Where the costs, at the time of the audit are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income? the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.52. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contact accruals for the end of the fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund sources (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510), and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid in by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligation from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce the obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Calculate percentages to spread the accrual across ER and /or NB in allocations, per grant. 10. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 11. Upload and email the JV to Supervisor and Lead. 12. Supervisor and Lead review, approve, and release the JV.
2022-063 The Health Care Authority did not have adequate controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Community Mental Health Services were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.958 Block Grants for Community Mental Health Services 93.958 COVID-19 Block Grants for Community Mental Health Services Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B09SM082638-01; 6B09SM082638-01M001; 6N09SM082638-01M004; 6B09SM082638-01M002; 6B09SM082638-01M003; 6N09SM083829-01M001; 1B09SM083829-01; 1B09SM086035-01; 6B09SM086035-01M001; 6B09SM086035-01M002; 6B09SM086035-01M003; 1B09SM085384-01; 1B09SM085912-01; 1B09SM083998-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $8,668,982 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grant for Community Mental Health Service (MHBG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to provide mental health treatment and crisis service to adults diagnosed with serious mental illness and children diagnosed with serious emotional disturbances. In fiscal year 2022, the Authority spent about $31.7 million in federal program funds, $20.5 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for MHBG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to MHBG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the amount of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the MHBG program were allowable and met period of performance requirements. During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $8,668,982. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition While the Authority has written procedures for the year-end estimated accruals, management did not ensure that only obligations within the state fiscal year were included. Furthermore, the Authority does not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure that its MHBG expenditures are for allowable activities and within the period of performance. We identified $8,668,982 in known questioned costs related to the estimated year-end accruals. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that MHBG expenditures are for allowable activities and within the period of performance. Expenditures reported on MHBG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $8,668,982 questioned costs associated with year-end accruals. HCA notes that the $8,668,982 questioned costs, do not meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments, which states impart: (2) Where the costs, at the time of the audit are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income? the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.52. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contact accruals for the end of the fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund sources (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510), and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid in by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligation from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce the obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Calculate percentages to spread the accrual across ER and /or NB in allocations, per grant. 10. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 11. Upload and email the JV to Supervisor and Lead. 12. Supervisor and Lead review, approve, and release the JV.
2022-063 The Health Care Authority did not have adequate controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Community Mental Health Services were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.958 Block Grants for Community Mental Health Services 93.958 COVID-19 Block Grants for Community Mental Health Services Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B09SM082638-01; 6B09SM082638-01M001; 6N09SM082638-01M004; 6B09SM082638-01M002; 6B09SM082638-01M003; 6N09SM083829-01M001; 1B09SM083829-01; 1B09SM086035-01; 6B09SM086035-01M001; 6B09SM086035-01M002; 6B09SM086035-01M003; 1B09SM085384-01; 1B09SM085912-01; 1B09SM083998-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $8,668,982 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grant for Community Mental Health Service (MHBG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to provide mental health treatment and crisis service to adults diagnosed with serious mental illness and children diagnosed with serious emotional disturbances. In fiscal year 2022, the Authority spent about $31.7 million in federal program funds, $20.5 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for MHBG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to MHBG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the amount of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the MHBG program were allowable and met period of performance requirements. During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $8,668,982. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition While the Authority has written procedures for the year-end estimated accruals, management did not ensure that only obligations within the state fiscal year were included. Furthermore, the Authority does not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure that its MHBG expenditures are for allowable activities and within the period of performance. We identified $8,668,982 in known questioned costs related to the estimated year-end accruals. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that MHBG expenditures are for allowable activities and within the period of performance. Expenditures reported on MHBG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $8,668,982 questioned costs associated with year-end accruals. HCA notes that the $8,668,982 questioned costs, do not meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments, which states impart: (2) Where the costs, at the time of the audit are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income? the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.52. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contact accruals for the end of the fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund sources (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510), and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid in by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligation from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce the obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Calculate percentages to spread the accrual across ER and /or NB in allocations, per grant. 10. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 11. Upload and email the JV to Supervisor and Lead. 12. Supervisor and Lead review, approve, and release the JV.
2022-063 The Health Care Authority did not have adequate controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Community Mental Health Services were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.958 Block Grants for Community Mental Health Services 93.958 COVID-19 Block Grants for Community Mental Health Services Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B09SM082638-01; 6B09SM082638-01M001; 6N09SM082638-01M004; 6B09SM082638-01M002; 6B09SM082638-01M003; 6N09SM083829-01M001; 1B09SM083829-01; 1B09SM086035-01; 6B09SM086035-01M001; 6B09SM086035-01M002; 6B09SM086035-01M003; 1B09SM085384-01; 1B09SM085912-01; 1B09SM083998-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $8,668,982 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grant for Community Mental Health Service (MHBG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to provide mental health treatment and crisis service to adults diagnosed with serious mental illness and children diagnosed with serious emotional disturbances. In fiscal year 2022, the Authority spent about $31.7 million in federal program funds, $20.5 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for MHBG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to MHBG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the amount of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the MHBG program were allowable and met period of performance requirements. During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $8,668,982. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition While the Authority has written procedures for the year-end estimated accruals, management did not ensure that only obligations within the state fiscal year were included. Furthermore, the Authority does not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure that its MHBG expenditures are for allowable activities and within the period of performance. We identified $8,668,982 in known questioned costs related to the estimated year-end accruals. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that MHBG expenditures are for allowable activities and within the period of performance. Expenditures reported on MHBG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $8,668,982 questioned costs associated with year-end accruals. HCA notes that the $8,668,982 questioned costs, do not meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments, which states impart: (2) Where the costs, at the time of the audit are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income? the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.52. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contact accruals for the end of the fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund sources (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510), and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid in by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligation from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce the obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Calculate percentages to spread the accrual across ER and /or NB in allocations, per grant. 10. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 11. Upload and email the JV to Supervisor and Lead. 12. Supervisor and Lead review, approve, and release the JV.
2022-067 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Prevention and Treatment of Substance Abuse program were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $19,959,714 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse (SABG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent about $67.3 million in federal program funds, $52 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year, and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for SABG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to SABG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the number of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior two audits, we reported the Authority did not have adequate internal controls to ensure payments made under the SABG program met the period of performance requirements. The prior finding numbers were 2020-059 and 2021-057. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the SABG program were allowable and met period of performance requirements. Year-end Estimated Accruals During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $19,870,537. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. Transaction Testing We judgmentally selected and examined two expenditures that were recorded in the accounting system with service months prior to the allowed period of performance for the SABG federal fiscal year 2022 award. We found one of the expenditures (50 percent) was an accrual made at the end of the year with no subsequent liquidation payment. We also judgmentally selected and examined five out of a total population of 24 expenditures made during the SABG federal fiscal year 2020 award liquidation period. We found three expenditures (60 percent) were for indirect charges automatically applied to the award through the Authority?s cost allocation system for activities that occurred after the allowed period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition While the Authority had written procedures for the year-end estimated accrual, management did not ensure that only obligations incurred within the state fiscal year were included. Furthermore, the Authority did not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Additionally, management did not ensure that the cost allocation system only allowed indirect payments occurring within an award?s period of performance to be charged to the grant, and did not monitor sufficiently to detect the improper charges. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure its SABG expenditures are for allowable activities and within the period of performance. We identified $19,870,537 in known questioned costs related to the estimated year-end accruals. For the federal fiscal year 2022 award that opened during the audit period, we identified questioned costs totaling $85,492 for services performed outside the period of performance. For the federal fiscal year 2020 award that closed during the audit period, we identified questioned costs totaling $3,685 for indirect expenditures that were unallowable. In total, we identified $19,959,714 in known federal questioned costs. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure the cost allocation system only charges eligible costs to the grant ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that SABG expenditures are for allowable activities and within the period of performance. Expenditures reported on SABG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $19,870,537 questioned costs associated with year-end accruals. HCA also does not concur with repayment of the $85,492 questioned costs associated with an accrual transaction. An accrual was entered in the accounting system based on expected billing. No invoice for the transaction was received for FY 22 grant activity, and as noted in the finding no payment was made. HCA does not draw funds from the grantor until a payment is made, and as a result no funds were drawn for this accrual. HCA concurs with the $3,685 for indirect expenditures that were unallowable for the grant award. An accounting cost center was not correctly updated at the end of the grant period, and as a result some termination leave indirect expenditures were charged to the grant after the period of performance ended. HCA will review processes to ensure cost centers are appropriately closed to prevent unallowable expenditures from being charged to grant awards and discuss repayment with the grantor. HCA notes that of the total $19,959,714 questioned costs, only $3,685 meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments, which states in part: (2) Where the costs, at the time of the audit, are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.502. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contract accruals for the end of a fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund source (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510) and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL 6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligations from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Sixth pivot table (SABG)identifies the ER and NB expenditures by allocation, so that they can be accrued by percentage of the total expenditures. 10. Calculate percentages to spread the accrual across ER and/or NB in allocations, per grant. 11. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 12. Upload and email the JV to Supervisor and Lead. 13. Supervisor and Lead review, approve, and release the JV.
2022-068 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Treatment of Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $661 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse. The Authority provides federal funds to counties, tribes, nonprofit organizations and other state agencies to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent approximately $67.3 million in federal program funds. Federal regulations require the Authority to spend no more than 5 percent of the federal program funds on administrative costs of the grant. Federal regulations also require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. To monitor the administrative earmarking requirement, the Authority has staff run monthly reports from its accounting system to determine if it is on track to meet the requirement at the time the grant closes. Upon closing a grant, the Authority also runs a final report to ensure it met the requirement. In prior audits, we reported the Authority did not have adequate internal controls and did not comply with earmarking requirements for the program. The prior finding number was 2021-056. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. During the audit period, the monthly tracking workbooks used to track the earmark requirement contained an erroneous calculation for determining the percentage of administrative costs. A $13,212 supplement to the technical assistance award was incorrectly added to the base grant award amount instead of the technical assistance amount in the tracking workbook. We found the Authority closed the federal fiscal year 2020 grant while having exceeded the 5 percent administrative maximum. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Throughout the year, staff ran the required monthly reports using the expenditures to date to track the percentage of administrative costs to meet compliance. However, management did not review these workbooks to ensure they correctly calculated and monitored this requirement. Effect of Condition and Questioned Costs The Authority was awarded $37,786,705 for the federal fiscal year 2020 grant. Therefore, it was allowed to spend $1,889,335 on administrative expenditures. However, it spent $1,889,996, which exceeded the administrative cost maximum by $661. As a result, we are questioning the $661 in unallowable administrative costs. By not establishing adequate internal controls, the Authority cannot ensure it meets the administrative earmarking requirement. By not complying with federal requirements, the Authority risks having to repay federal funds or having future federal funds withheld. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve internal controls to ensure it does not exceed the maximum allowable amount for administrative costs at the end of the award period. ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs with the incorrect calculation of the administrative expenditure limit in the tracking workbooks and will implement formal review procedures for the tracking workbooks. However, HCA does not concur with the identified questioned costs. HCA processed subsequent adjustments reducing the final administrative expenditures charged to the grant award to $1,840,664, less than the allowed amount of $1,889,335. The auditor did not consider the adjustments during the audit. Auditor?s Remarks At the time the Authority submitted its final SF-425 report, the administrative costs that were identified as charged to the grant exceeded the allowed maximum by $661. In addition, the expenditures in question were still charged to the grant in the accounting system at the time the final report was submitted to the grantor and were not reversed until four months later. As stated above, we recommend the Authority consult with the federal grantor to discuss whether the questioned cost reported in the finding need to be repaid. We reaffirm our finding and will review the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, defines factors affecting Allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 45 CFR Part 96, Block Grants, section 135, Restrictions on expenditure of grant, states in part: (b) The State shall limit expenditures on the following: (1) The State involved will not expend more than 5 percent of the grant to pay the costs of administering the grant
2022-067 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Prevention and Treatment of Substance Abuse program were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $19,959,714 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse (SABG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent about $67.3 million in federal program funds, $52 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year, and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for SABG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to SABG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the number of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior two audits, we reported the Authority did not have adequate internal controls to ensure payments made under the SABG program met the period of performance requirements. The prior finding numbers were 2020-059 and 2021-057. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the SABG program were allowable and met period of performance requirements. Year-end Estimated Accruals During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $19,870,537. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. Transaction Testing We judgmentally selected and examined two expenditures that were recorded in the accounting system with service months prior to the allowed period of performance for the SABG federal fiscal year 2022 award. We found one of the expenditures (50 percent) was an accrual made at the end of the year with no subsequent liquidation payment. We also judgmentally selected and examined five out of a total population of 24 expenditures made during the SABG federal fiscal year 2020 award liquidation period. We found three expenditures (60 percent) were for indirect charges automatically applied to the award through the Authority?s cost allocation system for activities that occurred after the allowed period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition While the Authority had written procedures for the year-end estimated accrual, management did not ensure that only obligations incurred within the state fiscal year were included. Furthermore, the Authority did not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Additionally, management did not ensure that the cost allocation system only allowed indirect payments occurring within an award?s period of performance to be charged to the grant, and did not monitor sufficiently to detect the improper charges. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure its SABG expenditures are for allowable activities and within the period of performance. We identified $19,870,537 in known questioned costs related to the estimated year-end accruals. For the federal fiscal year 2022 award that opened during the audit period, we identified questioned costs totaling $85,492 for services performed outside the period of performance. For the federal fiscal year 2020 award that closed during the audit period, we identified questioned costs totaling $3,685 for indirect expenditures that were unallowable. In total, we identified $19,959,714 in known federal questioned costs. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure the cost allocation system only charges eligible costs to the grant ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that SABG expenditures are for allowable activities and within the period of performance. Expenditures reported on SABG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $19,870,537 questioned costs associated with year-end accruals. HCA also does not concur with repayment of the $85,492 questioned costs associated with an accrual transaction. An accrual was entered in the accounting system based on expected billing. No invoice for the transaction was received for FY 22 grant activity, and as noted in the finding no payment was made. HCA does not draw funds from the grantor until a payment is made, and as a result no funds were drawn for this accrual. HCA concurs with the $3,685 for indirect expenditures that were unallowable for the grant award. An accounting cost center was not correctly updated at the end of the grant period, and as a result some termination leave indirect expenditures were charged to the grant after the period of performance ended. HCA will review processes to ensure cost centers are appropriately closed to prevent unallowable expenditures from being charged to grant awards and discuss repayment with the grantor. HCA notes that of the total $19,959,714 questioned costs, only $3,685 meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments, which states in part: (2) Where the costs, at the time of the audit, are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.502. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contract accruals for the end of a fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund source (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510) and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL 6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligations from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Sixth pivot table (SABG)identifies the ER and NB expenditures by allocation, so that they can be accrued by percentage of the total expenditures. 10. Calculate percentages to spread the accrual across ER and/or NB in allocations, per grant. 11. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 12. Upload and email the JV to Supervisor and Lead. 13. Supervisor and Lead review, approve, and release the JV.
2022-068 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Treatment of Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $661 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse. The Authority provides federal funds to counties, tribes, nonprofit organizations and other state agencies to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent approximately $67.3 million in federal program funds. Federal regulations require the Authority to spend no more than 5 percent of the federal program funds on administrative costs of the grant. Federal regulations also require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. To monitor the administrative earmarking requirement, the Authority has staff run monthly reports from its accounting system to determine if it is on track to meet the requirement at the time the grant closes. Upon closing a grant, the Authority also runs a final report to ensure it met the requirement. In prior audits, we reported the Authority did not have adequate internal controls and did not comply with earmarking requirements for the program. The prior finding number was 2021-056. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. During the audit period, the monthly tracking workbooks used to track the earmark requirement contained an erroneous calculation for determining the percentage of administrative costs. A $13,212 supplement to the technical assistance award was incorrectly added to the base grant award amount instead of the technical assistance amount in the tracking workbook. We found the Authority closed the federal fiscal year 2020 grant while having exceeded the 5 percent administrative maximum. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Throughout the year, staff ran the required monthly reports using the expenditures to date to track the percentage of administrative costs to meet compliance. However, management did not review these workbooks to ensure they correctly calculated and monitored this requirement. Effect of Condition and Questioned Costs The Authority was awarded $37,786,705 for the federal fiscal year 2020 grant. Therefore, it was allowed to spend $1,889,335 on administrative expenditures. However, it spent $1,889,996, which exceeded the administrative cost maximum by $661. As a result, we are questioning the $661 in unallowable administrative costs. By not establishing adequate internal controls, the Authority cannot ensure it meets the administrative earmarking requirement. By not complying with federal requirements, the Authority risks having to repay federal funds or having future federal funds withheld. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve internal controls to ensure it does not exceed the maximum allowable amount for administrative costs at the end of the award period. ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs with the incorrect calculation of the administrative expenditure limit in the tracking workbooks and will implement formal review procedures for the tracking workbooks. However, HCA does not concur with the identified questioned costs. HCA processed subsequent adjustments reducing the final administrative expenditures charged to the grant award to $1,840,664, less than the allowed amount of $1,889,335. The auditor did not consider the adjustments during the audit. Auditor?s Remarks At the time the Authority submitted its final SF-425 report, the administrative costs that were identified as charged to the grant exceeded the allowed maximum by $661. In addition, the expenditures in question were still charged to the grant in the accounting system at the time the final report was submitted to the grantor and were not reversed until four months later. As stated above, we recommend the Authority consult with the federal grantor to discuss whether the questioned cost reported in the finding need to be repaid. We reaffirm our finding and will review the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, defines factors affecting Allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 45 CFR Part 96, Block Grants, section 135, Restrictions on expenditure of grant, states in part: (b) The State shall limit expenditures on the following: (1) The State involved will not expend more than 5 percent of the grant to pay the costs of administering the grant
2022-067 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Prevention and Treatment of Substance Abuse program were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $19,959,714 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse (SABG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent about $67.3 million in federal program funds, $52 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year, and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for SABG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to SABG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the number of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior two audits, we reported the Authority did not have adequate internal controls to ensure payments made under the SABG program met the period of performance requirements. The prior finding numbers were 2020-059 and 2021-057. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the SABG program were allowable and met period of performance requirements. Year-end Estimated Accruals During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $19,870,537. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. Transaction Testing We judgmentally selected and examined two expenditures that were recorded in the accounting system with service months prior to the allowed period of performance for the SABG federal fiscal year 2022 award. We found one of the expenditures (50 percent) was an accrual made at the end of the year with no subsequent liquidation payment. We also judgmentally selected and examined five out of a total population of 24 expenditures made during the SABG federal fiscal year 2020 award liquidation period. We found three expenditures (60 percent) were for indirect charges automatically applied to the award through the Authority?s cost allocation system for activities that occurred after the allowed period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition While the Authority had written procedures for the year-end estimated accrual, management did not ensure that only obligations incurred within the state fiscal year were included. Furthermore, the Authority did not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Additionally, management did not ensure that the cost allocation system only allowed indirect payments occurring within an award?s period of performance to be charged to the grant, and did not monitor sufficiently to detect the improper charges. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure its SABG expenditures are for allowable activities and within the period of performance. We identified $19,870,537 in known questioned costs related to the estimated year-end accruals. For the federal fiscal year 2022 award that opened during the audit period, we identified questioned costs totaling $85,492 for services performed outside the period of performance. For the federal fiscal year 2020 award that closed during the audit period, we identified questioned costs totaling $3,685 for indirect expenditures that were unallowable. In total, we identified $19,959,714 in known federal questioned costs. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure the cost allocation system only charges eligible costs to the grant ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that SABG expenditures are for allowable activities and within the period of performance. Expenditures reported on SABG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $19,870,537 questioned costs associated with year-end accruals. HCA also does not concur with repayment of the $85,492 questioned costs associated with an accrual transaction. An accrual was entered in the accounting system based on expected billing. No invoice for the transaction was received for FY 22 grant activity, and as noted in the finding no payment was made. HCA does not draw funds from the grantor until a payment is made, and as a result no funds were drawn for this accrual. HCA concurs with the $3,685 for indirect expenditures that were unallowable for the grant award. An accounting cost center was not correctly updated at the end of the grant period, and as a result some termination leave indirect expenditures were charged to the grant after the period of performance ended. HCA will review processes to ensure cost centers are appropriately closed to prevent unallowable expenditures from being charged to grant awards and discuss repayment with the grantor. HCA notes that of the total $19,959,714 questioned costs, only $3,685 meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments, which states in part: (2) Where the costs, at the time of the audit, are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.502. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contract accruals for the end of a fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund source (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510) and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL 6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligations from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Sixth pivot table (SABG)identifies the ER and NB expenditures by allocation, so that they can be accrued by percentage of the total expenditures. 10. Calculate percentages to spread the accrual across ER and/or NB in allocations, per grant. 11. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 12. Upload and email the JV to Supervisor and Lead. 13. Supervisor and Lead review, approve, and release the JV.
2022-068 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Treatment of Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $661 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse. The Authority provides federal funds to counties, tribes, nonprofit organizations and other state agencies to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent approximately $67.3 million in federal program funds. Federal regulations require the Authority to spend no more than 5 percent of the federal program funds on administrative costs of the grant. Federal regulations also require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. To monitor the administrative earmarking requirement, the Authority has staff run monthly reports from its accounting system to determine if it is on track to meet the requirement at the time the grant closes. Upon closing a grant, the Authority also runs a final report to ensure it met the requirement. In prior audits, we reported the Authority did not have adequate internal controls and did not comply with earmarking requirements for the program. The prior finding number was 2021-056. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. During the audit period, the monthly tracking workbooks used to track the earmark requirement contained an erroneous calculation for determining the percentage of administrative costs. A $13,212 supplement to the technical assistance award was incorrectly added to the base grant award amount instead of the technical assistance amount in the tracking workbook. We found the Authority closed the federal fiscal year 2020 grant while having exceeded the 5 percent administrative maximum. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Throughout the year, staff ran the required monthly reports using the expenditures to date to track the percentage of administrative costs to meet compliance. However, management did not review these workbooks to ensure they correctly calculated and monitored this requirement. Effect of Condition and Questioned Costs The Authority was awarded $37,786,705 for the federal fiscal year 2020 grant. Therefore, it was allowed to spend $1,889,335 on administrative expenditures. However, it spent $1,889,996, which exceeded the administrative cost maximum by $661. As a result, we are questioning the $661 in unallowable administrative costs. By not establishing adequate internal controls, the Authority cannot ensure it meets the administrative earmarking requirement. By not complying with federal requirements, the Authority risks having to repay federal funds or having future federal funds withheld. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve internal controls to ensure it does not exceed the maximum allowable amount for administrative costs at the end of the award period. ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs with the incorrect calculation of the administrative expenditure limit in the tracking workbooks and will implement formal review procedures for the tracking workbooks. However, HCA does not concur with the identified questioned costs. HCA processed subsequent adjustments reducing the final administrative expenditures charged to the grant award to $1,840,664, less than the allowed amount of $1,889,335. The auditor did not consider the adjustments during the audit. Auditor?s Remarks At the time the Authority submitted its final SF-425 report, the administrative costs that were identified as charged to the grant exceeded the allowed maximum by $661. In addition, the expenditures in question were still charged to the grant in the accounting system at the time the final report was submitted to the grantor and were not reversed until four months later. As stated above, we recommend the Authority consult with the federal grantor to discuss whether the questioned cost reported in the finding need to be repaid. We reaffirm our finding and will review the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, defines factors affecting Allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 45 CFR Part 96, Block Grants, section 135, Restrictions on expenditure of grant, states in part: (b) The State shall limit expenditures on the following: (1) The State involved will not expend more than 5 percent of the grant to pay the costs of administering the grant
2022-067 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the Block Grants for Prevention and Treatment of Substance Abuse program were allowable and met period of performance requirements. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $19,959,714 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse (SABG). The Authority subawards federal funds to counties, tribes, and nonprofit organizations to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent about $67.3 million in federal program funds, $52 million of which it paid to subrecipients. The Authority can use grant funds only for costs that are allowable and incurred during the period of performance, as specified in the grant?s terms and conditions. At the beginning of each federal fiscal year, and whenever the Authority receives a new federal grant, it establishes new cost objectives and allocation codes to ensure expenditures are charged to the proper grants. When the Authority receives reimbursement requests, program managers are responsible for reviewing supporting documentation to determine if the services billed meet the period of performance requirements under the grant. Fiscal managers are also responsible for ensuring that payments are coded to the correct period. The Authority follows the accrual basis of accounting and uses the Agency Financial Reporting System (AFRS), which is the state?s central accounting system, to record federal expenditures. At the end of the fiscal year, the Authority?s federal financial reporting (FFR) unit estimates the amount of outstanding obligations to providers. These amounts are recorded in AFRS as an accrued expenditure for SABG and subsequently reported to OFM for the compilation of the Schedule of Expenditures of Federal Awards. FFR has written procedures for calculating its estimated accruals. The calculation begins by using a spreadsheet that tracks contractual obligations to SABG subrecipients and vendors to determine the total state obligation amount through the end of the subaward or contract, which usually extend past the end of the current state fiscal year. This total is then reduced by the number of actual payments made to the subrecipients and vendors, and is also reduced an additional 2 percent to account for anticipated underspending. The remaining total is then recorded as an estimated accrual for the fiscal year. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior two audits, we reported the Authority did not have adequate internal controls to ensure payments made under the SABG program met the period of performance requirements. The prior finding numbers were 2020-059 and 2021-057. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure payments to providers for the SABG program were allowable and met period of performance requirements. Year-end Estimated Accruals During the audit period, the FFR unit recorded two state fiscal year-end estimated accruals totaling $19,870,537. The Authority did not retain the obligation workbook used at the time of calculating these estimated accruals. Without this documentation, we were unable to assess the accuracy of the obligated amount. However, the Authority confirmed that the obligation amount used in the calculation included expenditures that were incurred after the state fiscal year. Any expenditures incurred after the state fiscal year has ended are not allowed to be included in an accrual. Furthermore, provider payments liquidated after the state fiscal year are not assigned to the estimated accrual in the accounting system. Therefore, we could not determine if the estimated accrual amount was reasonable and accurately reflected expenditures that occurred within the state fiscal year. Transaction Testing We judgmentally selected and examined two expenditures that were recorded in the accounting system with service months prior to the allowed period of performance for the SABG federal fiscal year 2022 award. We found one of the expenditures (50 percent) was an accrual made at the end of the year with no subsequent liquidation payment. We also judgmentally selected and examined five out of a total population of 24 expenditures made during the SABG federal fiscal year 2020 award liquidation period. We found three expenditures (60 percent) were for indirect charges automatically applied to the award through the Authority?s cost allocation system for activities that occurred after the allowed period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition While the Authority had written procedures for the year-end estimated accrual, management did not ensure that only obligations incurred within the state fiscal year were included. Furthermore, the Authority did not have a process in place to review estimated year-end accruals to verify the reasonableness of the accrual calculation. Additionally, management did not ensure that the cost allocation system only allowed indirect payments occurring within an award?s period of performance to be charged to the grant, and did not monitor sufficiently to detect the improper charges. Effect of Condition and Questioned Costs Without retaining adequate support for the estimated year-end accruals and having a process to verify the reasonableness of the estimated calculation, the Authority cannot reasonably ensure its SABG expenditures are for allowable activities and within the period of performance. We identified $19,870,537 in known questioned costs related to the estimated year-end accruals. For the federal fiscal year 2022 award that opened during the audit period, we identified questioned costs totaling $85,492 for services performed outside the period of performance. For the federal fiscal year 2020 award that closed during the audit period, we identified questioned costs totaling $3,685 for indirect expenditures that were unallowable. In total, we identified $19,959,714 in known federal questioned costs. Without establishing adequate internal controls, the Authority cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve its internal controls to ensure estimated accruals are reasonable and supported ? Improve its internal controls to ensure the cost allocation system only charges eligible costs to the grant ? Improve its internal controls to ensure payments are within the award?s period of performance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Authority?s Response HCA concurs in part. HCA acknowledges that the version of the document used to determine year-end accruals was not retained as a supporting document. We also acknowledge that some portion of the accrued amount could have included obligations beyond state fiscal year 2022. HCA does not agree that we cannot reasonably ensure that SABG expenditures are for allowable activities and within the period of performance. Expenditures reported on SABG are prepared based on cash and liquidations and all costs are reviewed to ensure they meet the period of performance. While the year-end accruals may included some amounts beyond the state fiscal year, the amounts accrued were based on four quarters of activity. This would not result in errors in federal reporting or federal cash draws. To question the year-end accruals in their entirety is an overstatement of any potential error that was made. The year-end accruals were solely recorded as estimates, and were not used to make any program payments or draw funds from the grantor. HCA only makes program payments to subrecipients and contractors after receiving invoices which are reviewed by staff, including review that the expenditures are within the grant period of performance. HCA does not agree with repayment of the $19,870,537 questioned costs associated with year-end accruals. HCA also does not concur with repayment of the $85,492 questioned costs associated with an accrual transaction. An accrual was entered in the accounting system based on expected billing. No invoice for the transaction was received for FY 22 grant activity, and as noted in the finding no payment was made. HCA does not draw funds from the grantor until a payment is made, and as a result no funds were drawn for this accrual. HCA concurs with the $3,685 for indirect expenditures that were unallowable for the grant award. An accounting cost center was not correctly updated at the end of the grant period, and as a result some termination leave indirect expenditures were charged to the grant after the period of performance ended. HCA will review processes to ensure cost centers are appropriately closed to prevent unallowable expenditures from being charged to grant awards and discuss repayment with the grantor. HCA notes that of the total $19,959,714 questioned costs, only $3,685 meet the definition of Improper Payments as defined in Uniform Guidance 2 CFR 200.1. Based on preliminary discussions with the grantor, HCA should expect that repayment of questioned costs related to the accruals will not be requested as no funds were drawn. This information was shared with the auditor. Auditor?s Remarks In its response, the Authority acknowledged it did not retain supporting documentation to verify the year-end estimated accrual expenditures were incurred during the state fiscal year. Furthermore, the Authority acknowledged that the year-end estimated accruals likely included expenditures incurred after the state fiscal year. The Authority reports cash and accrued expenditures on the Schedule of Expenditures of Federal Awards and, as such, the accruals are required to be audited. In our judgment, the Authority does not have sufficient processes in place to verify the reasonableness of the year-end estimated accrual calculations. We reaffirm our finding and will follow up on the status of the Authority?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments, which states in part: (2) Where the costs, at the time of the audit, are not supported by adequate documentation. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 502, Basis for determining Federal awards expended, states in part: (a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards including grants, cost-reimbursement contracts under FAR, compacts with Indian Tribes, cooperative agreements, and direct appropriations; the disbursement of funds to subrecipients, the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force. Title 2 CFR Part 200, Uniform Guidance, section 510, Financial statements, states in part: (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with 200.502. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Behavioral Health Grant Unit Procedures, state in part: WHAT IS ACCRUAL: Fiscal year end and end of biennium contract subsequent payments. PURPOSE: To prepare contract accruals for the end of a fiscal year or biennium and the subsequent payment of those invoices by the Behavioral Health Grant Unit. BACKGROUND: Accruals and liquidations are looked at a high-level by program, fund, and fund source (GF-S/GF-F), to see if the agency has over liquidated our authority. Some accruals are based on actual billings/claims, but a good chunk is based on estimates, because of the lag in billings, as well as the amount of contracts per grant; mainly block and SOR. BLOCK GRANT AND SOR PROCESS 1. Create a SFYXX Accrual workbook using a JV workbook template. 2. Pull grant direct expenditure data to date including GL 0159 (liquidations), cash expenditures (6510) and accruals (6505), using your grant Webi criteria. a. We pull in accruals (GL 6505), because we want to see accruals that have already been booked by AP, so we don?t double book them. b. Expenditures paid in the new SFY will automatically need to be accrued since they weren?t paid by the end of the SFY. c. Filter out/do not accrue on any interagency transactions including state universities. Those are processed outside of our unit. 3. Take total SFY of year processing obligations from grant spreadsheet. ? NOTE: For auditing purposes, if one was to reproduce the obligation amount it could change if you refer to the original document later than the date that we established the original obligation amount. Please always refer to the accrual spreadsheet for the obligation amount pulled at the time for the purpose of accruals. 4. Reduce obligation amount by 2% so that we don?t over accrue (The percentage was recommended?due to not spending everything that is obligated.). 5. First pivot to run is to identify total expenditures and accruals for SFY being processed. Use the expenditure amount for the second pivot table. 6. Second pivot to run is to figure out the split out the expenditure between ER and NB, because they are the most common. Calculate the left to accrue amount by taking the obligations with 2% reduction subtracting the expenditures as well as the previous accrual amount. To see what you need to accrue. 7. Third and Fourth pivot tables find the most common PI for each of the subobjects. 8. Fifth pivot table identifies most common org index. 9. Sixth pivot table (SABG)identifies the ER and NB expenditures by allocation, so that they can be accrued by percentage of the total expenditures. 10. Calculate percentages to spread the accrual across ER and/or NB in allocations, per grant. 11. Complete the rest of the workbook following our JV process with obtaining the JV log number, filling out the JV log, adding the explanation and backup data for the upload and release tab. On the JV tab complete the TC to be 736 and include GL 5111. If we need to complete a reversal the TC would be 736R. 12. Upload and email the JV to Supervisor and Lead. 13. Supervisor and Lead review, approve, and release the JV.
2022-068 The Health Care Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. Assistance Listing Number and Title: 93.959 Block Grants for Prevention and Treatment of Substance Abuse 93.959 COVID-19 Block Grants for Prevention and Treatment of Substance Abuse Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1B08TI083138-01; 6B08TI083138-01M003; 6B08TI083138-01M004; 6B08TI083486-01M001; 6B08TI083486-01M002; 6B08TI083486-01M004; 1B08TI83519-01; 1B08TI084681-01; 1B08TI083977-01 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $661 Background The Health Care Authority, Division of Behavioral Health and Recovery, administers the Block Grants for Prevention and Treatment of Substance Abuse. The Authority provides federal funds to counties, tribes, nonprofit organizations and other state agencies to develop prevention programs and provide treatment and support services. In fiscal year 2022, the Authority spent approximately $67.3 million in federal program funds. Federal regulations require the Authority to spend no more than 5 percent of the federal program funds on administrative costs of the grant. Federal regulations also require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. To monitor the administrative earmarking requirement, the Authority has staff run monthly reports from its accounting system to determine if it is on track to meet the requirement at the time the grant closes. Upon closing a grant, the Authority also runs a final report to ensure it met the requirement. In prior audits, we reported the Authority did not have adequate internal controls and did not comply with earmarking requirements for the program. The prior finding number was 2021-056. Description of Condition The Authority did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirement for the Block Grants for Prevention and Treatment of Substance Abuse. During the audit period, the monthly tracking workbooks used to track the earmark requirement contained an erroneous calculation for determining the percentage of administrative costs. A $13,212 supplement to the technical assistance award was incorrectly added to the base grant award amount instead of the technical assistance amount in the tracking workbook. We found the Authority closed the federal fiscal year 2020 grant while having exceeded the 5 percent administrative maximum. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Throughout the year, staff ran the required monthly reports using the expenditures to date to track the percentage of administrative costs to meet compliance. However, management did not review these workbooks to ensure they correctly calculated and monitored this requirement. Effect of Condition and Questioned Costs The Authority was awarded $37,786,705 for the federal fiscal year 2020 grant. Therefore, it was allowed to spend $1,889,335 on administrative expenditures. However, it spent $1,889,996, which exceeded the administrative cost maximum by $661. As a result, we are questioning the $661 in unallowable administrative costs. By not establishing adequate internal controls, the Authority cannot ensure it meets the administrative earmarking requirement. By not complying with federal requirements, the Authority risks having to repay federal funds or having future federal funds withheld. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Authority: ? Improve internal controls to ensure it does not exceed the maximum allowable amount for administrative costs at the end of the award period. ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Authority?s Response HCA concurs with the incorrect calculation of the administrative expenditure limit in the tracking workbooks and will implement formal review procedures for the tracking workbooks. However, HCA does not concur with the identified questioned costs. HCA processed subsequent adjustments reducing the final administrative expenditures charged to the grant award to $1,840,664, less than the allowed amount of $1,889,335. The auditor did not consider the adjustments during the audit. Auditor?s Remarks At the time the Authority submitted its final SF-425 report, the administrative costs that were identified as charged to the grant exceeded the allowed maximum by $661. In addition, the expenditures in question were still charged to the grant in the accounting system at the time the final report was submitted to the grantor and were not reversed until four months later. As stated above, we recommend the Authority consult with the federal grantor to discuss whether the questioned cost reported in the finding need to be repaid. We reaffirm our finding and will review the status of the Authority?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, defines factors affecting Allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 45 CFR Part 96, Block Grants, section 135, Restrictions on expenditure of grant, states in part: (b) The State shall limit expenditures on the following: (1) The State involved will not expend more than 5 percent of the grant to pay the costs of administering the grant
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-013 The Department of Corrections improperly charged $37,392 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $37,392 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of financial Management allocated approximately $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent approximately $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Corrections spent $240 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $37,392 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method and randomly selected and examined 59 monthly payments out of a total population of 29,459. In addition to the 59 payments, we judgmentally picked two individually significant items. We examined the supporting documentation for each monthly payment and found one instance where an employee?s payroll overpayment totaling $37,392 was identified and referred to collections by the Department, but was inadvertently charged to the CRF. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the actual questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the overpayment made to an employee from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $37,392. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department of Corrections (DOC) would like to thank the State Auditor?s Office (SAO) for the audit of the Coronavirus Relief Fund (CRF) grant. The Department agrees that questioned costs were charged to the grant due to an employee?s overpayment. While the SAO has complimented our internal controls and processes for being able to track each line item in the CRF, we also know that internal controls can always be improved. The Department has additional allowable costs that were not charged to the grant which should compensate for the questioned costs identified and intends to discuss this change with the funder. The Department appreciated the patience of the SAO in obtaining supporting documentation and having clarifying conversations during the audit. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-014 The Department of Social and Health Services improperly charged $390 to the Coronavirus Relief Fund. Assistance Listing Number and Title: 21.019 COVID-19 Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Known Questioned Cost Amount: $390 Background In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the spending of $2.2 trillion in federal funds to respond to the COVID-19 pandemic. The CARES Act established the Coronavirus Relief Fund (CRF), which authorized $150 billion in federal financial assistance for state, territorial, tribal, and certain eligible local governments. Through the CARES Act, Washington was awarded about $2.95 billion of CRF money to help fund the state?s response to the COVID-19 pandemic. Of this amount, the Office of Financial Management allocated about $2.2 billion to state agencies for various programs. In fiscal year 2022, state agencies spent about $345 million in CRF funds. The CARES Act requires recipients to only use CRF payments to cover: ? Necessary expenditures incurred due to the public health emergency (COVID-19) ? Costs that were not accounted for in the government?s most recently approved budget as of March 27, 2020 ? Costs that were incurred during the period that begins March 1, 2020, and ends December 31, 2021 In fiscal year 2022, the Department of Social and Health Services spent $40 million in CRF funds. The Department used the funds to cover payroll costs for employees who were substantially dedicated to responding to the COVID-19 public health emergency. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department improperly charged $390 to the CRF. We found the Department had adequate internal controls to ensure it materially complied with activities allowed or unallowed and allowable costs/cost principles requirements. We used a statistical sampling method to randomly select and examine 83 monthly payments out of a total population of 9,415. We reviewed the supporting documentation for each monthly payment and found: ? One overpayment for four hours overtime and overtime shift totaling $208. ? One payment where there was no supporting documentation for an employee?s shift differential pay of $7.50. ? One overpayment for call-back pay totaling $174.23. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition The Department followed procedures for approving payroll costs. However, multiple reviews did not prevent the unsupported shift differential pay and the two overpayments from being charged to the CRF. Effect of Condition and Questioned Costs The Department improperly charged the CRF for payroll costs totaling $390. Based on the unallowable payments, we estimate the likely questioned costs for this grant to be $45,266. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department?s Response The Department concurs with the audit finding. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the way we used the funds and will take additional action if appropriate. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-016 The Department of Commerce did not have adequate internal controls over and did not comply with requirements to ensure payments to subrecipients of the Emergency Rental Assistance program were allowable and properly supported. Assistance Listing Number and Title: 21.023 COVID-19 Emergency Rental Assistance Program Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $255,642,551 Background Congress passed two acts authorizing federal funds for the Emergency Rental Assistance (ERA) program to respond to the COVID-19 pandemic. The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, provided $25 billion for ERA. These funds are known as ERA1. The American Rescue Plan Act of 2021, enacted on March 11, 2021, provided $21.55 billion in additional funding for ERA. These funds are known as ERA2. The funds are provided directly to states, U.S. territories, local governments and, in the case of ERA1, Indian tribes, to assist eligible households through existing or newly created rental assistance programs. The Department of Commerce administers the ERA program in Washington. The Department subawarded federal funds to subrecipients to provide financial assistance to households, landlords and utility providers. In fiscal year 2022, the Department spent about $450 million in ERA1 and ERA2 funds. During the audit period, the Department allocated program funds to 38 ERA1 subrecipients and 12 ERA2 subrecipients. Grant recipients may use ERA1 and ERA2 funds for administrative expenses, housing stability services, financial assistance, and other affordable rental housing and eviction prevention purposes. Most of the expenditures the Department spent were for financial assistance to eligible households, which included payment of rent, rental arrears, utilities and home energy costs, utilities and home energy costs arrears, housing stability services and other expenses related to housing. Under the ERA1 program, award funds used for ?other expenses? must be related to housing and ?incurred due, directly or indirectly, to the COVID-19 outbreak.? The amount for prospective rent cannot exceed three months under a single household application. Financial assistance arrears may only cover household expenses accrued on or after March 13, 2020, up to a maximum 15 months for ERA1 and a maximum of 18 months under ERA1 and ERA2 combined. There is no maximum dollar amount for the cumulative financial assistance that may be provided on behalf of an eligible household beyond the requirement that the amounts paid be based on documentation of household income, leases and equivalent forms. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to ensure payments for the ERA program were allowable and properly supported. During the audit period, the Department only required high-level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of the reimbursement payment, the Department implemented a fiscal review process for the ERA1 and ERA2 subrecipients. We reviewed the three fiscal reviews completed in the audit period and determined they were sufficient for ensuring payments to these subrecipients were allowable and adequately supported. However, we determined the Department did not complete fiscal reviews for 35 of the 38 ERA1 subrecipients (92 percent) and all 12 ERA2 subrecipients (100 percent) during the audit period. We used a statistical sampling method to randomly select and review 55 out of 369 payments. Additionally, we judgmentally reviewed one individually significant payment that exceeded $23 million. In total, we examined more than $258 million in provider payments as part of the audit. Of the 56 payments examined, we identified 54 payments (96 percent), including the individually significant payment, that did not have adequate documentation and for which the subrecipient did not receive a fiscal review to ensure the payment(s) was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee the ERA program. Department staff approved payments to subrecipients without adequate supporting documentation, and management relied on annual fiscal monitoring reviews to ensure subrecipients had proper support for reimbursement payments. However, management said that due to limited staffing and resources, they were only able to conduct monitoring for three subrecipients during the audit period. Effect of Condition and Questioned Costs We determined the Department did not receive adequate supporting documentation before paying subrecipients and did not perform fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $255,642,551 in known federal questioned costs and $437,002,382 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes and spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement additional monitoring procedures to ensure adequate review of each subrecipient?s use of the federal subaward ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. Every week of delay would increase the number of people at risk of dying. During fiscal years 2021 through 2023, the department created the following programs with federal funding: ? Eviction Rent Assistance Program (ERAP) 1.0 and 2.0, with Coronavirus State Fiscal Recovery Funds allocated by the Washington State Legislature. ? Treasury Rent Assistance Program (T-RAP) 1.0 and 2.0, with funds awarded to the Department by the United States Department of Treasury. The Department endeavored to quickly deploy these programs either concurrently or on overlapping timelines, as the federal government doubled down on passing legislation to provide much needed assistance to the states. At the time the Department received the first ERAP funds for rental assistance, the Department had current contracts with grantees for the same activity and for whom monitoring plans had been completed. The vast majority of our grantees are local government entities, with whom the Department has a long history of contracting and partnering on delivering services. Local governments have controls in place and a proven track record of administering housing assistance funds, so the Department has an inherent trust and confidence in their administrative and fiscal control functions, including the detailed review of expenditures. When the Department received the first emergency rental assistance funds (August 2020) the funding for the program was set to expire just four months after the federal award, requiring the Department to lift bureaucratic barriers and issue funds quickly. It was not until late December 2020 that Congress extended the end date and we were informed we could continue to fund the program into 2021. The Department had started a fiscal review process for ERAP 1 and ERAP 2 programs following those awards. Upon receiving the results of the fiscal year 2021 emergency rental assistance audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. The State Auditor?s Office identified this deficiency during fiscal year 2021. Following that, at the end of fiscal year 2022, the department began to review supporting backup documentation for all expenditures. Unfortunately this process had not been implemented in full to meet the second audit requirements for fiscal year 2022. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We will continue to submit monthly and quarterly data and reconciliation reports to the United States Department of Treasury and work with the Washington State Auditor?s Office in response to any current or future audits. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-019 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $28,886,606 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state?s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2022, state agencies spent more than $1.4 billion in SLFRF funds, $132 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0), in addition to transportation, tourism, and other pandemic-recovery projects. During fiscal year 2022, the Department expended about $111 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP 2.0 subrecipients. We determined that the Department did not perform fiscal reviews or any program reviews for 20 of its 32 subrecipients (63 percent) during the audit period. We used a statistical sampling method to randomly select and review seven out of 12 subrecipients for which the Department completed monitoring during the audit period. We determined four of the seven fiscal reviews completed were insufficient for ensuring payments to these subrecipients were allowable and adequately supported, primarily because the support reviewed lacked enough detail to ensure the activities were allowable and within the period of performance. We also examined program monitoring documentation completed for these same seven subrecipients. The Department selected only one household from each subrecipient for eligibility verification. We determined these reviews did not provide reasonable assurance that payments to the subrecipients were made only on behalf of eligible households. We also used a statistical sampling method to randomly select and review 56 out of 627 payments. Additionally, we judgmentally selected and reviewed one individually significant payment of $6 million. In total, we examined 57 provider payments totaling $48.5 million. Of the 57 payments examined, we identified 37 (65 percent), including the individually significant payment, that did not have adequate documentation to ensure the payment was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. Department staff approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper support and only served eligible households. However, management said that due to limited staffing and resources, they were only able to monitor 12 subrecipients during the audit period, wherein staff elected to review just one household payment for each subrecipient for appropriateness. Furthermore, the program did not have written policies and procedures in place documenting the programmatic and fiscal monitoring requirements for staff to follow. Therefore, management could not ensure that reviews were thorough and consistent, included a valid sample of subrecipient records, and required detailed source documentation, including accounting support. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $28,886,606 in known federal questioned costs and $71,007,353 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing detailed supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement written policies and monitoring procedures to ensure adequate review of each subrecipient?s use of federal funds ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Ensure it has sufficient staffing and resources to monitor each subrecipient, as required under Uniform Guidance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. In fiscal year 202, Commerce created the Eviction Rent Assistance Programs 1.0 and 2.0: Coronavirus State Fiscal Recovery Funds allocated by the Washington State legislature to fund the program. All of the rental assistance programs included multiple funding allocations. To provide much needed assistance to the state, the Department quickly deployed the programs either concurrently or on overlapping timelines. The vast majority of our grantees are local government entities with whom the Department has a long history of contracting and partnering with to deliver services. Federal requirements dictate local governments ensure their internal controls meet standards to comply with all compliance requirements. The Department used that expectation to rely on their administrative and fiscal control functions to ensure compliance. The Department received the first emergency rental assistance funds in August 2020 and the funding was set to expire four months after the award issuance. The Department moved quickly to relieve barriers to issue funding. In December 2020 Congress extended the end date to continue the funding for this program into 2021. As a result of the fiscal year 2021 audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. As a result of the deficiencies reported in the fiscal year 2021 audit, the program deployed new subrecipient monitoring risk assessment processes, and now completes a new assessment for each award at the time of the award. Once the deficiency was identified, the Department began to review supporting backup documentation for all expenditures. The current finding also focused on specific sets of expenditures which were not reviewed in detail. As a result, the Department is currently evaluating the best approach to obtain and review supporting documentation at a detail level to ensure compliance with all requirements. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We thank the State Auditor?s Office for identifying areas we could improve to meet all compliance requirements for federal funding. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-019 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $28,886,606 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state?s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2022, state agencies spent more than $1.4 billion in SLFRF funds, $132 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0), in addition to transportation, tourism, and other pandemic-recovery projects. During fiscal year 2022, the Department expended about $111 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP 2.0 subrecipients. We determined that the Department did not perform fiscal reviews or any program reviews for 20 of its 32 subrecipients (63 percent) during the audit period. We used a statistical sampling method to randomly select and review seven out of 12 subrecipients for which the Department completed monitoring during the audit period. We determined four of the seven fiscal reviews completed were insufficient for ensuring payments to these subrecipients were allowable and adequately supported, primarily because the support reviewed lacked enough detail to ensure the activities were allowable and within the period of performance. We also examined program monitoring documentation completed for these same seven subrecipients. The Department selected only one household from each subrecipient for eligibility verification. We determined these reviews did not provide reasonable assurance that payments to the subrecipients were made only on behalf of eligible households. We also used a statistical sampling method to randomly select and review 56 out of 627 payments. Additionally, we judgmentally selected and reviewed one individually significant payment of $6 million. In total, we examined 57 provider payments totaling $48.5 million. Of the 57 payments examined, we identified 37 (65 percent), including the individually significant payment, that did not have adequate documentation to ensure the payment was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. Department staff approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper support and only served eligible households. However, management said that due to limited staffing and resources, they were only able to monitor 12 subrecipients during the audit period, wherein staff elected to review just one household payment for each subrecipient for appropriateness. Furthermore, the program did not have written policies and procedures in place documenting the programmatic and fiscal monitoring requirements for staff to follow. Therefore, management could not ensure that reviews were thorough and consistent, included a valid sample of subrecipient records, and required detailed source documentation, including accounting support. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $28,886,606 in known federal questioned costs and $71,007,353 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing detailed supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement written policies and monitoring procedures to ensure adequate review of each subrecipient?s use of federal funds ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Ensure it has sufficient staffing and resources to monitor each subrecipient, as required under Uniform Guidance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. In fiscal year 202, Commerce created the Eviction Rent Assistance Programs 1.0 and 2.0: Coronavirus State Fiscal Recovery Funds allocated by the Washington State legislature to fund the program. All of the rental assistance programs included multiple funding allocations. To provide much needed assistance to the state, the Department quickly deployed the programs either concurrently or on overlapping timelines. The vast majority of our grantees are local government entities with whom the Department has a long history of contracting and partnering with to deliver services. Federal requirements dictate local governments ensure their internal controls meet standards to comply with all compliance requirements. The Department used that expectation to rely on their administrative and fiscal control functions to ensure compliance. The Department received the first emergency rental assistance funds in August 2020 and the funding was set to expire four months after the award issuance. The Department moved quickly to relieve barriers to issue funding. In December 2020 Congress extended the end date to continue the funding for this program into 2021. As a result of the fiscal year 2021 audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. As a result of the deficiencies reported in the fiscal year 2021 audit, the program deployed new subrecipient monitoring risk assessment processes, and now completes a new assessment for each award at the time of the award. Once the deficiency was identified, the Department began to review supporting backup documentation for all expenditures. The current finding also focused on specific sets of expenditures which were not reviewed in detail. As a result, the Department is currently evaluating the best approach to obtain and review supporting documentation at a detail level to ensure compliance with all requirements. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We thank the State Auditor?s Office for identifying areas we could improve to meet all compliance requirements for federal funding. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-019 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $28,886,606 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state?s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2022, state agencies spent more than $1.4 billion in SLFRF funds, $132 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0), in addition to transportation, tourism, and other pandemic-recovery projects. During fiscal year 2022, the Department expended about $111 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP 2.0 subrecipients. We determined that the Department did not perform fiscal reviews or any program reviews for 20 of its 32 subrecipients (63 percent) during the audit period. We used a statistical sampling method to randomly select and review seven out of 12 subrecipients for which the Department completed monitoring during the audit period. We determined four of the seven fiscal reviews completed were insufficient for ensuring payments to these subrecipients were allowable and adequately supported, primarily because the support reviewed lacked enough detail to ensure the activities were allowable and within the period of performance. We also examined program monitoring documentation completed for these same seven subrecipients. The Department selected only one household from each subrecipient for eligibility verification. We determined these reviews did not provide reasonable assurance that payments to the subrecipients were made only on behalf of eligible households. We also used a statistical sampling method to randomly select and review 56 out of 627 payments. Additionally, we judgmentally selected and reviewed one individually significant payment of $6 million. In total, we examined 57 provider payments totaling $48.5 million. Of the 57 payments examined, we identified 37 (65 percent), including the individually significant payment, that did not have adequate documentation to ensure the payment was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. Department staff approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper support and only served eligible households. However, management said that due to limited staffing and resources, they were only able to monitor 12 subrecipients during the audit period, wherein staff elected to review just one household payment for each subrecipient for appropriateness. Furthermore, the program did not have written policies and procedures in place documenting the programmatic and fiscal monitoring requirements for staff to follow. Therefore, management could not ensure that reviews were thorough and consistent, included a valid sample of subrecipient records, and required detailed source documentation, including accounting support. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $28,886,606 in known federal questioned costs and $71,007,353 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing detailed supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement written policies and monitoring procedures to ensure adequate review of each subrecipient?s use of federal funds ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Ensure it has sufficient staffing and resources to monitor each subrecipient, as required under Uniform Guidance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. In fiscal year 202, Commerce created the Eviction Rent Assistance Programs 1.0 and 2.0: Coronavirus State Fiscal Recovery Funds allocated by the Washington State legislature to fund the program. All of the rental assistance programs included multiple funding allocations. To provide much needed assistance to the state, the Department quickly deployed the programs either concurrently or on overlapping timelines. The vast majority of our grantees are local government entities with whom the Department has a long history of contracting and partnering with to deliver services. Federal requirements dictate local governments ensure their internal controls meet standards to comply with all compliance requirements. The Department used that expectation to rely on their administrative and fiscal control functions to ensure compliance. The Department received the first emergency rental assistance funds in August 2020 and the funding was set to expire four months after the award issuance. The Department moved quickly to relieve barriers to issue funding. In December 2020 Congress extended the end date to continue the funding for this program into 2021. As a result of the fiscal year 2021 audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. As a result of the deficiencies reported in the fiscal year 2021 audit, the program deployed new subrecipient monitoring risk assessment processes, and now completes a new assessment for each award at the time of the award. Once the deficiency was identified, the Department began to review supporting backup documentation for all expenditures. The current finding also focused on specific sets of expenditures which were not reviewed in detail. As a result, the Department is currently evaluating the best approach to obtain and review supporting documentation at a detail level to ensure compliance with all requirements. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We thank the State Auditor?s Office for identifying areas we could improve to meet all compliance requirements for federal funding. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-019 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $28,886,606 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state?s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2022, state agencies spent more than $1.4 billion in SLFRF funds, $132 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0), in addition to transportation, tourism, and other pandemic-recovery projects. During fiscal year 2022, the Department expended about $111 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP 2.0 subrecipients. We determined that the Department did not perform fiscal reviews or any program reviews for 20 of its 32 subrecipients (63 percent) during the audit period. We used a statistical sampling method to randomly select and review seven out of 12 subrecipients for which the Department completed monitoring during the audit period. We determined four of the seven fiscal reviews completed were insufficient for ensuring payments to these subrecipients were allowable and adequately supported, primarily because the support reviewed lacked enough detail to ensure the activities were allowable and within the period of performance. We also examined program monitoring documentation completed for these same seven subrecipients. The Department selected only one household from each subrecipient for eligibility verification. We determined these reviews did not provide reasonable assurance that payments to the subrecipients were made only on behalf of eligible households. We also used a statistical sampling method to randomly select and review 56 out of 627 payments. Additionally, we judgmentally selected and reviewed one individually significant payment of $6 million. In total, we examined 57 provider payments totaling $48.5 million. Of the 57 payments examined, we identified 37 (65 percent), including the individually significant payment, that did not have adequate documentation to ensure the payment was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. Department staff approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper support and only served eligible households. However, management said that due to limited staffing and resources, they were only able to monitor 12 subrecipients during the audit period, wherein staff elected to review just one household payment for each subrecipient for appropriateness. Furthermore, the program did not have written policies and procedures in place documenting the programmatic and fiscal monitoring requirements for staff to follow. Therefore, management could not ensure that reviews were thorough and consistent, included a valid sample of subrecipient records, and required detailed source documentation, including accounting support. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $28,886,606 in known federal questioned costs and $71,007,353 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing detailed supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement written policies and monitoring procedures to ensure adequate review of each subrecipient?s use of federal funds ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Ensure it has sufficient staffing and resources to monitor each subrecipient, as required under Uniform Guidance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. In fiscal year 202, Commerce created the Eviction Rent Assistance Programs 1.0 and 2.0: Coronavirus State Fiscal Recovery Funds allocated by the Washington State legislature to fund the program. All of the rental assistance programs included multiple funding allocations. To provide much needed assistance to the state, the Department quickly deployed the programs either concurrently or on overlapping timelines. The vast majority of our grantees are local government entities with whom the Department has a long history of contracting and partnering with to deliver services. Federal requirements dictate local governments ensure their internal controls meet standards to comply with all compliance requirements. The Department used that expectation to rely on their administrative and fiscal control functions to ensure compliance. The Department received the first emergency rental assistance funds in August 2020 and the funding was set to expire four months after the award issuance. The Department moved quickly to relieve barriers to issue funding. In December 2020 Congress extended the end date to continue the funding for this program into 2021. As a result of the fiscal year 2021 audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. As a result of the deficiencies reported in the fiscal year 2021 audit, the program deployed new subrecipient monitoring risk assessment processes, and now completes a new assessment for each award at the time of the award. Once the deficiency was identified, the Department began to review supporting backup documentation for all expenditures. The current finding also focused on specific sets of expenditures which were not reviewed in detail. As a result, the Department is currently evaluating the best approach to obtain and review supporting documentation at a detail level to ensure compliance with all requirements. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We thank the State Auditor?s Office for identifying areas we could improve to meet all compliance requirements for federal funding. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-019 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $28,886,606 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state?s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2022, state agencies spent more than $1.4 billion in SLFRF funds, $132 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0), in addition to transportation, tourism, and other pandemic-recovery projects. During fiscal year 2022, the Department expended about $111 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP 2.0 subrecipients. We determined that the Department did not perform fiscal reviews or any program reviews for 20 of its 32 subrecipients (63 percent) during the audit period. We used a statistical sampling method to randomly select and review seven out of 12 subrecipients for which the Department completed monitoring during the audit period. We determined four of the seven fiscal reviews completed were insufficient for ensuring payments to these subrecipients were allowable and adequately supported, primarily because the support reviewed lacked enough detail to ensure the activities were allowable and within the period of performance. We also examined program monitoring documentation completed for these same seven subrecipients. The Department selected only one household from each subrecipient for eligibility verification. We determined these reviews did not provide reasonable assurance that payments to the subrecipients were made only on behalf of eligible households. We also used a statistical sampling method to randomly select and review 56 out of 627 payments. Additionally, we judgmentally selected and reviewed one individually significant payment of $6 million. In total, we examined 57 provider payments totaling $48.5 million. Of the 57 payments examined, we identified 37 (65 percent), including the individually significant payment, that did not have adequate documentation to ensure the payment was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. Department staff approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper support and only served eligible households. However, management said that due to limited staffing and resources, they were only able to monitor 12 subrecipients during the audit period, wherein staff elected to review just one household payment for each subrecipient for appropriateness. Furthermore, the program did not have written policies and procedures in place documenting the programmatic and fiscal monitoring requirements for staff to follow. Therefore, management could not ensure that reviews were thorough and consistent, included a valid sample of subrecipient records, and required detailed source documentation, including accounting support. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $28,886,606 in known federal questioned costs and $71,007,353 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing detailed supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement written policies and monitoring procedures to ensure adequate review of each subrecipient?s use of federal funds ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Ensure it has sufficient staffing and resources to monitor each subrecipient, as required under Uniform Guidance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. In fiscal year 202, Commerce created the Eviction Rent Assistance Programs 1.0 and 2.0: Coronavirus State Fiscal Recovery Funds allocated by the Washington State legislature to fund the program. All of the rental assistance programs included multiple funding allocations. To provide much needed assistance to the state, the Department quickly deployed the programs either concurrently or on overlapping timelines. The vast majority of our grantees are local government entities with whom the Department has a long history of contracting and partnering with to deliver services. Federal requirements dictate local governments ensure their internal controls meet standards to comply with all compliance requirements. The Department used that expectation to rely on their administrative and fiscal control functions to ensure compliance. The Department received the first emergency rental assistance funds in August 2020 and the funding was set to expire four months after the award issuance. The Department moved quickly to relieve barriers to issue funding. In December 2020 Congress extended the end date to continue the funding for this program into 2021. As a result of the fiscal year 2021 audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. As a result of the deficiencies reported in the fiscal year 2021 audit, the program deployed new subrecipient monitoring risk assessment processes, and now completes a new assessment for each award at the time of the award. Once the deficiency was identified, the Department began to review supporting backup documentation for all expenditures. The current finding also focused on specific sets of expenditures which were not reviewed in detail. As a result, the Department is currently evaluating the best approach to obtain and review supporting documentation at a detail level to ensure compliance with all requirements. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We thank the State Auditor?s Office for identifying areas we could improve to meet all compliance requirements for federal funding. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-019 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $28,886,606 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state?s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2022, state agencies spent more than $1.4 billion in SLFRF funds, $132 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0), in addition to transportation, tourism, and other pandemic-recovery projects. During fiscal year 2022, the Department expended about $111 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP 2.0 subrecipients. We determined that the Department did not perform fiscal reviews or any program reviews for 20 of its 32 subrecipients (63 percent) during the audit period. We used a statistical sampling method to randomly select and review seven out of 12 subrecipients for which the Department completed monitoring during the audit period. We determined four of the seven fiscal reviews completed were insufficient for ensuring payments to these subrecipients were allowable and adequately supported, primarily because the support reviewed lacked enough detail to ensure the activities were allowable and within the period of performance. We also examined program monitoring documentation completed for these same seven subrecipients. The Department selected only one household from each subrecipient for eligibility verification. We determined these reviews did not provide reasonable assurance that payments to the subrecipients were made only on behalf of eligible households. We also used a statistical sampling method to randomly select and review 56 out of 627 payments. Additionally, we judgmentally selected and reviewed one individually significant payment of $6 million. In total, we examined 57 provider payments totaling $48.5 million. Of the 57 payments examined, we identified 37 (65 percent), including the individually significant payment, that did not have adequate documentation to ensure the payment was for allowable activities, met cost principles, and occurred within the award?s period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. Department staff approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper support and only served eligible households. However, management said that due to limited staffing and resources, they were only able to monitor 12 subrecipients during the audit period, wherein staff elected to review just one household payment for each subrecipient for appropriateness. Furthermore, the program did not have written policies and procedures in place documenting the programmatic and fiscal monitoring requirements for staff to follow. Therefore, management could not ensure that reviews were thorough and consistent, included a valid sample of subrecipient records, and required detailed source documentation, including accounting support. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal reviews to ensure that expenditures were for allowable activities. As a result, we identified $28,886,606 in known federal questioned costs and $71,007,353 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing detailed supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Implement written policies and monitoring procedures to ensure adequate review of each subrecipient?s use of federal funds ? Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement ? Ensure it has sufficient staffing and resources to monitor each subrecipient, as required under Uniform Guidance ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response The Coronavirus pandemic created an unprecedented crisis of imminent evictions for an estimated 200,000 households who would face homelessness. Prompt program implementation was critical to reducing evictions as homelessness was shown to increase the spread of COVID-19 leading to death. In fiscal year 202, Commerce created the Eviction Rent Assistance Programs 1.0 and 2.0: Coronavirus State Fiscal Recovery Funds allocated by the Washington State legislature to fund the program. All of the rental assistance programs included multiple funding allocations. To provide much needed assistance to the state, the Department quickly deployed the programs either concurrently or on overlapping timelines. The vast majority of our grantees are local government entities with whom the Department has a long history of contracting and partnering with to deliver services. Federal requirements dictate local governments ensure their internal controls meet standards to comply with all compliance requirements. The Department used that expectation to rely on their administrative and fiscal control functions to ensure compliance. The Department received the first emergency rental assistance funds in August 2020 and the funding was set to expire four months after the award issuance. The Department moved quickly to relieve barriers to issue funding. In December 2020 Congress extended the end date to continue the funding for this program into 2021. As a result of the fiscal year 2021 audit, it was determined the fiscal review must be completed for all program reimbursements, even if the detail review of expenditures was completed at our subrecipient level. The initial fiscal monitoring was based on previously conducted risk assessments, so not all payees received a fiscal monitoring. As a result of the deficiencies reported in the fiscal year 2021 audit, the program deployed new subrecipient monitoring risk assessment processes, and now completes a new assessment for each award at the time of the award. Once the deficiency was identified, the Department began to review supporting backup documentation for all expenditures. The current finding also focused on specific sets of expenditures which were not reviewed in detail. As a result, the Department is currently evaluating the best approach to obtain and review supporting documentation at a detail level to ensure compliance with all requirements. The Department continues to complete reviews of supporting documentation for fiscal year 2023 expenditures and we strive to meet all other program requirements. We thank the State Auditor?s Office for identifying areas we could improve to meet all compliance requirements for federal funding. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2022-002 The University of Washington did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. Assistance Listing Number and Title: Various, Research and Development Cluster ? University of Washington Federal Grantor Name: Various Federal Award/Contract Number: Various Pass-through Entity Name: Various Pass-through Award/Contract Number: Various Applicable Compliance Component: Special Tests and Provisions: Key Personnel Known Questioned Cost Amount: None Background The federal government sponsors research and development (R&D) activities under a variety of types of awards. Most commonly, these are grants, cooperative agreements, and contracts to achieve objectives agreed upon between the federal awarding agency and the non-federal entity. The types of R&D conducted under these awards vary widely. Grants for R&D are awarded to non-federal entities on the basis of applications or proposals submitted to federal agencies or pass-through entities. An award is then negotiated that will include the purpose of the project, the amount of the award and the terms and conditions. R&D awards may include staffing proposals that specify key personnel who will work on the project, as well as the extent of their planned involvement. One of these key personnel is typically a principal investigator (PI) who contributes to the scientific development or execution of a project in a substantive, measurable way. The non-federal entity is required to meet key personnel commitments specified in the award and may be required to obtain approval from the grantor for certain types of changes. The University of Washington (University) is the largest recipient of federal R&D awards in the state of Washington. The University expended funds from 2,396 separate awards for the R&D grants, with expenditures totaling approximately $1.02 billion of the almost $1.17 billion expended statewide during the audit period. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure key personnel commitments specified in grant proposals or awards were met. To determine if the University complied with key personnel requirements, we reviewed the University?s internal controls over monitoring key personnel time and effort and also examined grant awards to determine if key personnel identified in the application/proposal and award were involved in the project as required. We used a statistical sampling method to randomly select and examine 59 unique budget numbers assigned to R&D programs out of a total population of 7,486. We examined these samples and found: ? Four instances where we could not determine whether the University properly monitored key personnel time and effort to ensure that they met award requirements identified in the grant application/proposal and award were involved in the project as required. ? Two instances where key personnel were not involved in the project as required. Specifically, we found: o One award for which the PI was required to spend approximately 16 percent of their time on the award, but spent less than 5 percent o One award where the PI was required to spend 2 percent of their time on the award, but only spent .67 percent We consider these internal control deficiencies to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition While we determined the University had policies and procedures to ensure that key personnel are involved in the grant projects as required, there were not policies or procedures to ensure that there was sufficient University level oversight to ensure key personnel commitments were met. Effect of Condition By not establishing adequate internal controls, the University cannot reasonably ensure it meets the key personnel requirement. Recommendation We recommend the University improve its internal controls to ensure key personnel identified in the application/proposal and award were involved in the project as required. In addition, if the University identifies key personnel commitments are not going to meet required levels, ensure that federal awarding agency approval is obtained when required. University?s Response The University has established internal controls to ensure compliance with program requirements through the effort certification and project reporting processes, and budget reconciliation requirements. However, we agree there are areas for improvement int terms of staff and PI training, and available resources to monitor contribution and documentation of committed levels of effort. The University will implement the following improvements: ? The University offers multiple training courses to research administrators and principal investigators on management of sponsored awards. We will update our training materials and provide additional training on documentation of effort for PIs and key personnel, and prior approval requirements for reductions in effort. ? Update guidance and instructions for effort certifications to ensure all devoted effort is properly accounted for during the effort certification process. ? Develop exception reports to provide additional oversight to monitor deviations from committed effort for PIs and key personnel. Auditor?s Remarks We thank the University for its cooperation and assistance throughout the audit. We will review the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 308, Revision of budget and program plans, states in part: (a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal award process. It may include either the Federal and non-Federal share (see definition for Federal share in ? 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.