(2025-032) Title: Internal control over Health Disparities program subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Health and Human Services Public Safety State Bureau: Maine Center for Disease Control & Prevention Emergency Medical Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Assistance Listing Number: 93.391 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must: • ensure that every subaward is clearly identified to the subrecipient as a subaward and includes specific information. • evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring procedures. • monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition: The Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises (Health Disparities) program was implemented to address disparities in access to healthcare in populations that are at high-risk and underserved, including racial and ethnic minority groups and people living in rural communities. The Health Disparities program is administered by the Maine Center for Disease Control & Prevention’s (MeCDC) Division of Population Health Equity. MeCDC has a memorandum of understanding in place with the Department of Public Safety’s Emergency Medical Services (EMS) Bureau to assist in administering the Health Disparities program. The Office of the State Auditor (OSA) tested 11 contracts or contract amendments issued by MeCDC and 3 contracts issued by EMS for compliance with: • award identification requirements and found: o 9 contract amendments issued by MeCDC did not include the name of the Federal agency issuing the award, the Federal award identification number, or the Federal award date; and o all 3 contracts issued by EMS did not include the Federal award identification number, the Federal award date, the assistance listing title and number, or the indirect cost rate for the Federal award. • subrecipient risk evaluation procedures and found through inquiry of program personnel at MeCDC and EMS that policies and procedures were not in place to ensure risk assessments were performed or used to determine subrecipient monitoring activities. As a result, subrecipient monitoring activities were the same for all subrecipients/contracts, regardless of risk. • subrecipient monitoring requirements and found that documentation could not be provided to support that: o follow-up occurred regarding late receipt of an incomplete financial report for 1 contract overseen by MeCDC; o an appropriate response was completed to previously identified inaccurate expense reporting for 1 contract overseen by MeCDC; o a required report was reviewed for 1 contract overseen by EMS; and o required reports were received or that appropriate action was taken in response for 2 contracts overseen by EMS. OSA determined that payments made to subrecipients for the aforementioned reporting deficiencies were allowable based upon subsequent reports and other monitoring procedures performed. OSA utilized a risk-based approach to select 2 contracts issued by MeCDC and selected a non-statistical random sample of all other contracts. Context: In fiscal year 2025, MeCDC provided $3.2 million from a total of $6.2 million and EMS provided $301,000 from a total of $449,000 to Health Disparities program subrecipients. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. • Noncompliance with the Federal statutes, regulations, and the terms and conditions of the subaward by subrecipients may go undetected. • Potential future questioned costs and disallowances Recommendation: We recommend that the Department implement policies and procedures: • to ensure that all required information is included in contracts and contract amendments; • that require evaluation of each subrecipient’s risk of noncompliance specifically for the purpose of determining the appropriate subrecipient monitoring to be performed; and • implement policies and procedures to ensure all required subrecipient monitoring activities are performed. Corrective Action Plan: See F-19 Management’s Response: DHHS Response: The Department partially agrees with this finding. We agree with the recommendations that the Department implement policies and procedures to ensure all required information is included in contracts and that all required subrecipient monitoring is completed. The Department disagrees that we do not have subrecipient risk evaluation procedures. The Department evaluates risk on its subrecipients for the purposes of determining the appropriate subrecipient monitoring in multiple ways. The first assessment of risk is when a subaward is competitively bid. The second assessment of risk is built into the Maine Uniform Accounting and Auditing Practices for Community Agencies (MAAP) in which higher risk subrecipients undergo a higher level of testing by Independent Public Accountants. Finally, the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. DHHS Contact: Eden Hale, Associate Director, Division of Population Health Equity, Maine CDC, 207-441-1090 DPS Response: The Department partially agrees with this finding. The Department of Public Safety acknowledges that EMS was missing policies and procedures around specific subrecipient monitoring activities and required contract language identifying the Federal Grant. However, the Department has these policies and procedures in place for the Contract/Grant Team which oversees the majority of the Federal Funding for the Department. The Department will ensure all Bureaus receive guidance, training, and policies and procedures. DPS Contact: Derek Gorneau, Assistant to the Commissioner, DPS, 207-530-3531 Auditor’s Concluding Remarks: DHHS: 2 CFR 200.332(b) states that the Department must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. The Department has indicated in Management’s Response that the criteria set forth in 2 CFR 200.332(b) have been met; however, the following rebuttals illustrate that the Department is not in compliance with Federal requirements: • The Department identifies the first assessment of risk: when a subaward is competitively bid. o While OSA acknowledges this does occur, not all subawards are competitively bid. o The level of subrecipient monitoring that the Department performs is based on the services provided, not on specific subrecipients, as required. • The Department identifies the second assessment of risk: built into MAAP in which higher risk subrecipients undergo a higher level of testing by independent public accountants. o A subrecipient deemed higher risk as the result of a risk evaluation in accordance with 2 CFR 200.332 may not be deemed higher risk in accordance with MAAP standards. • The Department identifies the third assessment of risk: the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. o The Department did not provide documentation to demonstrate that these procedures are performed as a result of a risk evaluation. The Department’s existing policies and procedures do not require nor provide support for the evaluation of each subrecipient’s risk of noncompliance specifically for the purpose of determining the appropriate subrecipient monitoring to be performed. DPS: The Department asserts that policies and procedures are in place for the Contract/Grant Team, but did not demonstrate that these policies and procedures were adhered to in relation to contracts for the Health Disparities program. The finding remains as stated. (State Number: 25-1123-03)
(2025-033) Title: Internal control over Health Disparities program payments to subrecipients needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Assistance Listing Number: 93.391 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of the award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Condition: The Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises (Health Disparities) program was implemented to address disparities in access to healthcare in populations that are at high-risk and underserved, including racial and ethnic minority groups and people living in rural communities. The Health Disparities program is administered by the Maine Center for Disease Control & Prevention’s (MeCDC) Division of Population Health Equity. MeCDC has a memorandum of understanding in place with the Department of Public Safety’s Emergency Medical Services (EMS) Bureau to assist in administering the Health Disparities program. The Office of the State Auditor (OSA) tested 27 payments issued by MeCDC to subrecipients and found: • 2 payments totaling $69,535 to 1 subrecipient against a contract for which a cash surplus existed at the time of payment. • 1 payment of $40,621 based on a quarterly financial report that contained detailed expense information that did not match approved contract expenditures. • 2 payments totaling $252,824 to 1 subrecipient to close out a contract were issued prior to receipt by the Department of the required final progress reports. Therefore, MeCDC does not have policies and procedures in place to prevent payments to subrecipients that do not meet the criteria set forth in 2 CFR 200.303 at the time of payment. Subsequently, MeCDC was able to provide reports to demonstrate that the funds had been used in accordance with the terms and conditions of the award. OSA utilized a risk-based approach to select 9 payments issued by MeCDC and selected a non-statistical random sample of subrecipient contracts to test all payments made in fiscal year 2025 that were related to those contracts. Context: MeCDC provided $3.2 million from a total of $6.2 million to Health Disparities program subrecipients during fiscal year 2025. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that MeCDC implement procedures and enhance oversight to ensure payments made to subrecipients are accurate, allowable, and adequately supported at the time of payment. Corrective Action Plan: See F-20 Management’s Response: The Department disagrees with this finding. The conditions noted do not support that costs were unallowable. Furthermore, the Department demonstrated that the funds had been used in accordance with the terms and conditions of the award. The Department’s processes provide reasonable assurance that payments are appropriate. Contact: Eden Hale, Associate Director, Division of Population Health Equity, Maine CDC, 207-441-1090 Auditor’s Concluding Remarks: OSA acknowledges that subsequent information demonstrated that the funds were used for allowable purposes; however, this does not absolve the Department of responsibility to ensure accuracy and appropriateness at the time of payment. The Department did not demonstrate that controls are in place to ensure that all payments to subrecipients are allowable at the time of payment. The finding remains as stated. (State Number: 25-1123-04)
(2025-034) Title: Internal control over Health Disparities program subrecipient cash management needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Assistance Listing Number: 93.391 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises (Health Disparities) program was implemented to address disparities in access to healthcare in populations that are at high-risk and underserved, including racial and ethnic minority groups and people living in rural communities. The Health Disparities program is administered by the Maine Center for Disease Control & Prevention’s (MeCDC) Division of Population Health Equity. The Department makes equal advance monthly payments to subrecipients and then reconciles those amounts to quarterly financial reports submitted by the subrecipient. This procedure does not take into consideration the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and MeCDC’s subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. As a result, MeCDC procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: MeCDC provided $3.2 million from a total of $6.2 million to Health Disparities program subrecipients during fiscal year 2025. Cause: • Lack of adequate subrecipient monitoring procedures • Lack of centralized oversight of subrecipient monitoring Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that MeCDC implement monitoring procedures over subrecipient cash management requirements to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for the Health Disparities program. Corrective Action Plan: See F-20 Management’s Response: The Department disagrees with this finding. The Department is in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement of the funds. Payments are made as close as is administratively feasible. The Compliance Supplement suggested audit procedures for Cash Management for pass-through entities refers to 200.305(b)(1) ... that same paragraph states that the timing and amount of advance payments must be as close as is administratively feasible. Contact: Eden Hale, Associate Director, Division of Population Health Equity, MeCDC, 207-441-1090 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation emphasizes a single sentence from the broader paragraph, omitting context that informs the regulation’s full intent. According to the 2025 Compliance Supplement, pass-through entities must monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and their disbursement for program purposes is minimized as required by the applicable cash management requirements in the Federal award to the recipient (2 CFR 200.305(b)(1)). 2 CFR 200.305(b)(1) states that the recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. The Department references the phrase “as close as is administratively feasible” to justify their current process; however, this phrase is part of a broader requirement that establishes specific conditions for advance payments. The regulation requires that the timing between when the subrecipient receives Federal funds from the State and when the subrecipient disburses those funds is closely monitored to ensure that disbursements align with actual, immediate cash needs. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. The finding remains as stated. (State Number: 25-1123-05)
(2025-036) Title: Internal control over PDG subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Health and Human Services Education State Bureau: Office of Child and Family Services Office of Teaching and Learning Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Every Student Succeeds Act/Preschool Development Grants Assistance Listing Number: 93.434 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $128,333 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of subrecipients who received program funds during fiscal year 2025 and identified known questioned costs associated with 1 of those subrecipients based on various compliance attributes. Since circumstances are unique to each subrecipient, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must: • ensure that every subaward is clearly identified to the subrecipient as a subaward and includes specific information. • evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring procedures. • monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. • ensure that the subrecipient takes corrective action on all Single Audit findings related to the subaward, other audit findings, site visits, and written notifications of adverse conditions which will impact the ability to meet milestones or the objectives of a subaward. Condition: The Every Student Succeeds Act/Preschool Development Grants (PDG) program assists states in helping low-income and disadvantaged children enter kindergarten prepared and ready to succeed in school and helps improve the transitions from the early care and education setting to elementary school. PDG is administered by the Department of Health and Human Services’ (DHHS) Office of Child and Family Services (OCFS). DHHS has a memorandum of understanding in place with the Department of Education (DOE) to assist in administering PDG. OSA tested 2 contracts issued by OCFS and 2 contracts issued by DOE for compliance with: • award identification requirements, and found: o 2 contracts issued by OCFS did not include the Federal award identification number or the grant award number; and o 2 contracts issued by DOE did not include the Federal award identification number, the Federal award date, the assistance listing title and number, the name of Federal agency, the assistance listing title and number, identification of whether the Federal award is for research and development, or the indirect cost rate for the Federal award. • subrecipient risk evaluation procedures, and found through inquiry of program personnel at OCFS and DOE that policies and procedures were not in place to ensure risk assessments were performed or used to determine subrecipient monitoring activities. As a result, subrecipient monitoring activities were the same for all subrecipients/contracts regardless of risk. • subrecipient monitoring requirements, and found that OCFS did not identify an appropriate level of monitoring for 1 contract. Evidence of significant developments, including inability to meet performance goals, that impacted the subrecipient’s ability to meet the objectives of the subaward were present prior to quarterly reporting. OSA determined that payments made to this subrecipient for the aforementioned monitoring deficiencies were not allowable based upon subsequent financial reports and the results of other monitoring procedures performed during the fiscal year. Payments to the subrecipient were withheld after April 2025. OSA has questioned the full amount of program expenditures paid to this subrecipient during the fiscal year, totaling $128,333. OSA selected a non-statistical random sample of all PDG subrecipient contracts. Context: In fiscal year 2025, PDG expenditures totaled $11.5 million, of which approximately $910,000 was paid to OCFS subrecipients and $709,000 was paid to DOE subrecipients. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. • Noncompliance with the Federal statutes, regulations, and the terms and conditions of the subaward by subrecipients may go undetected. • Payments may be issued in error to subrecipients not in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. • Known questioned costs • Potential future questioned costs and disallowances Recommendation: We recommend that the Department enhance oversight and implement policies and procedures to ensure that: • all required information is included in contracts and contract amendments; • an evaluation of each subrecipient’s risk of noncompliance specifically for the purpose of determining the appropriate subrecipient monitoring is performed; and • all required subrecipient monitoring activities are performed. Corrective Action Plan: See F-21 Management’s Response: The Departments partially agree with this finding. DHHS agrees that two contracts did not include the Federal award identification number or the grant award number. DOE agrees that two contracts did not include the Federal award identification number, the Federal award date, the assistance listing title and number, the indirect cost rate for the Federal award, name of Federal agency, assistance listing title and number, identification of whether the Federal award is for research and development, and the indirect cost rate for the federal award. The Departments disagree that subrecipient risk evaluation policies and procedures were not in place to ensure risk assessments were performed or used to determine subrecipient monitoring activities. DOE utilizes a risk assessment tool when developing monitoring of invoices associated with subrecipients. Contact: Tara Williams, Associate Director of Early Care & Education, OCFS, DHHS, 207-557-2342 Auditor’s Concluding Remarks: 2 CFR 200.332(b) states that the Department must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. DHHS’ existing policies and procedures do not require nor provide support for the evaluation of each subrecipient’s risk of noncompliance specifically for the purpose of determining the appropriate subrecipient monitoring to be performed. Furthermore, as noted in the Condition, OSA found that DHHS did not identify an appropriate level of monitoring for 1 contract. If DHHS had adequate controls in place over subrecipient risk evaluation requirements, appropriate subrecipient monitoring procedures would have been developed and performed in response to the subrecipient’s inability to meet the objectives of the subaward, including withholding payments to the subrecipient sooner. Additionally, the risk assessment tool that DOE refers to in Management’s Response only determines the frequency of invoicing (monthly or quarterly) and does not determine the level of subrecipient monitoring needed based on the subrecipient’s risk. The finding remains as stated. (State Number: 25-1122-04)
(2025-039) Title: Internal control over PDG procurement needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Office of State Procurement Services Division of Contract Management Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Every Student Succeeds Act/Preschool Development Grants Assistance Listing Number: 93.434 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.317; 5 MRSA 1825-B and D; Office of State Procurement Services (OSPS) policies The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must follow the same policies and procedures it uses for procurements with non-Federal funds. Awards shall be made to the best-value bidder, taking into consideration the best interest of the State. The requirement to competitively bid a contract may be waived if specific criteria is met, including the item or service can only be procured from one source or it is an emergency procurement. Each bid, with the name of the bidder, must be entered on record. Each record, with the successful bid indicated, must be open to public inspection after the letting of the contract. The Department must justify the selection of vendor, either through competitive or noncompetitive process, and provide a detailed explanation of cost, demonstrating how the best value for the State is ensured. The Chief Procurement Officer shall make the public aware of contracts and grants for which bids are being requested and communicate the procedure used in reviewing bids. Contracts must be submitted to OSPS at least 14 days prior to the contract start date. A Notice of Intent to Waive the Competitive Bidding Process (NOI) must be posted to the OSPS website for 7 calendar days prior to the start of a non-competitively bid contract. Condition: The Every Student Succeeds Act/Preschool Development Grants (PDG) program assists states in helping low-income and disadvantaged children enter kindergarten prepared and ready to succeed in school and helps improve the transitions from the early care and education setting to elementary school. PDG is administered by the Office of Child and Family Services (OCFS). OSPS is the central oversight agency for all State procurement. The Department of Health and Human Services (DHHS) Division of Contract Management (DCM) oversees the solicitation and contract implementation for all DHHS procurement. DCM coordinates with DHHS program personnel to evaluate and select vendors and subrecipients, determine contract terms, and provide required documentation to OSPS. OSPS is responsible for reviewing and approving Procurement Justification Forms (PJFs) submitted by DCM on behalf of program personnel prior to the award of contracts. The PJF represents program personnel’s assertion that the selected procurement method is appropriate under applicable State and Federal requirements, and that required evaluation procedures have been performed. OSPS must publicly post a NOI for all procurements over $10,000 entered into without a competitive process for a minimum of 7 calendar days prior to the start of the contract. The NOI includes the signed PJF provided to OSPS by DCM. The Office of the State Auditor (OSA) tested 10 OCFS contracts, 4 procured competitively and 6 procured noncompetitively, that accounted for $5.6 million of the $6.5 million in OCFS PDG procurement-related transactions in fiscal year 2025 and found: • PJFs were reviewed for reasonableness by DCM and OSPS, but DHHS could not provide documentation to support the assertions made by OCFS were accurate. • For 6 contracts, DCM provided the PJF to OSPS for their review after the contract had commenced, between 16 and 192 days after the contract start date. For 8 contracts, OSPS approved the PJF after the contract commenced, between 18 and 214 days after the contract start date. For 1 contract, documentary evidence of PJF approval by OSPS could not be provided. • For 4 noncompetitive contracts, OSPS posted the NOI after contract performance had commenced, between 38 and 214 days after the contract start date. Additionally, for 1 noncompetitive contract, services had been initiated and financial obligations incurred and a NOI was not posted to the OSPS webstie. OSA utilized a risk-based approach to select 5 contracts issued by OCFS and a non-statistical random sample of all other contracts. Context: In fiscal year 2025, the Department expended $6.5 million in OCFS procurement-related transactions from PDG funds of $11.5 million. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and future disallowances • Noncompliance with Federal and State procurement requirements, including NOI posting requirements, could result in the need to void a contract or exposure to legal proceedings. Recommendation: We recommend that OSPS: • increase agency awareness of the procedures related to the timing of procurement contract documentation being submitted to OSPS for review prior to the contract start date; and • finalize and implement an updated procurement policy and procedure manual that identifies the parties responsible for key aspects of the procurement process. We also recommend that DCM and OCFS develop policies and procedures and increase oversight to ensure all procurement transactions comply with Federal and State requirements, including: • DCM obtaining and reviewing documentation to support the assertions made by OCFS for accuracy and reasonableness; and • ensuring PJFs are completed, reviewed, and submitted to OSPS prior to the contract start date. Corrective Action Plan: See F-22 Management’s Response: DAFS Response: The Department agrees with this finding. OSPS does not authorize, encourage, or approve agencies allowing vendors to perform work at risk. However, OSPS also does not delay review and approval solely due to contract start-date issues, as doing so would increase the State’s risk exposure, potentially disrupt federally required programs, and hinder agencies’ compliance with federal period-of-performance requirements. To address these concerns, OSPS will formalize and issue policy guidance that clearly defines agency and OSPS roles and responsibilities in the contracting process. This guidance will expand the agency-focused section to emphasize timely submission and processing, along with the risks and implications associated with contracting delays. In advance of fiscal year-end, OSPS will issue a separate policy document and companion guidance as a spotlight topic in the monthly newsletter and posted to the intranet for agency reference. DAFS Contact: David Morris, Acting Chief Procurement Officer, OSPS, 207-624-7335 DHHS Response: The Department partially agrees with this finding. There is not a requirement to provide documentation that the Department personnel’s assertions are accurate regarding Department personnel’s review of PJFs. The Department agrees that it can improve the timing of procurement documents in relation to the start dates of the contracts. Extenuating circumstances exist periodically that prevent the timeliness of these documents. In some cases, there are delays in the grant approval at the Federal level. Delays in Legislative approval of budgets can also lead to procurement documentation delays. DHHS Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Absent adequate documentation to support the veracity of the assertions made on the PJF by program personnel, the best value for the State cannot be ensured. The finding remains as stated. (State Number: 25-1122-05)
(2025-040) Title: Internal control over PDG subrecipient cash management needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Every Student Succeeds Act/Preschool Development Grants Assistance Listing Number: 93.434 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Every Student Succeeds Act/Preschool Development Grants (PDG) program assists states in helping low-income and disadvantaged children enter kindergarten prepared and ready to succeed in school and helps improve the transitions from the early care and education setting to elementary school. PDG is administered by the Department of Health and Human Services’ Office of Child and Family Services (OCFS). The Department makes equal advance monthly payments to subrecipients and then reconciles those amounts to quarterly financial reports submitted by the subrecipient. This procedure does not take into consideration the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and OCFS’ subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. As a result, OCFS procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: OCFS provided approximately $910,000 from a total of $11.5 million to PDG program subrecipients during fiscal year 2025. Cause: • Lack of adequate subrecipient monitoring procedures • Lack of centralized oversight of subrecipient monitoring Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that OCFS implement monitoring procedures over subrecipient cash management requirements to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for the PDG program. Corrective Action Plan: See F-22 Management’s Response: The Department disagrees with this finding. The Department is in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement of the funds. Payments are made as close as is administratively feasible. The Compliance Supplement suggested audit procedures for Cash Management for pass-through entities refers to 200.305(b)(1) ...that same paragraph states that the timing and amount of advance payments must be as close as is administratively feasible. Contact: Tara Williams, Associate Director of Early Care & Education, OCFS, DHHS, 207-557-2342 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation emphasizes a single sentence from the broader paragraph, omitting context that informs the regulation’s full intent. According to the 2025 Compliance Supplement, pass-through entities must monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and their disbursement for program purposes is minimized as required by the applicable cash management requirements in the Federal award to the recipient (2 CFR 200.305(b)(1)). 2 CFR 200.305(b)(1) states that the recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. The Department references the phrase “as close as is administratively feasible” to justify their current process; however, this phrase is part of a broader requirement that establishes specific conditions for advance payments. The regulation requires that the timing between when the subrecipient receives Federal funds from the State and when the subrecipient disburses those funds is closely monitored to ensure that disbursements align with actual, immediate cash needs. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. Furthermore, in finding 2025-036, Internal control over PDG subrecipient monitoring procedures needs improvement, the Office of the State Auditor identified that 1 PDG subrecipient received equal advance monthly payments that significantly outpaced the subrecipient’s spending of PDG funds throughout fiscal year 2025. Payments to the subrecipient were withheld after April 2025 for the subrecipient’s inability to meet performance goals, not due to the Department’s monitoring of subrecipient cash management, and OCFS allowed the subrecipient to retain the excess PDG funds. This exception corroborates that controls are not in place over subrecipient cash management. The finding remains as stated. (State Number: 25-1122-03)
(2025-046) Title: Internal control over TANF procurement needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Office of State Procurement Services Division of Contract Management Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.317; 5 MRSA 1825-B and D; Office of State Procurement Services (OSPS) policies The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must follow the same policies and procedures it uses for procurements with non-Federal funds. Awards shall be made to the best-value bidder, taking into consideration the best interest of the State. The requirement to competitively bid a contract may be waived if specific criteria is met, including the item or service can only be procured from one source or it is an emergency procurement. Each bid, with the name of the bidder, must be entered on record. Each record, with the successful bid indicated, must be open to public inspection after the letting of the contract. The Department must justify the selection of vendor, either through competitive or noncompetitive process, and provide a detailed explanation of cost, demonstrating how the best value for the State is ensured. The Chief Procurement Officer shall make the public aware of contracts and grants for which bids are being requested and communicate the procedure used in reviewing bids. Contracts must be submitted to OSPS at least 14 days prior to the contract start date. A Notice of Intent to Waive the Competitive Bidding Process (NOI) must be posted to the OSPS website for 7 calendar days prior to the start of a noncompetitively bid contract. Condition: The Temporary Assistance for Needy Families (TANF) program was implemented to provide temporary cash assistance, job training, and support services to low-income families with children. The TANF program is administered by the Office for Family Independence (OFI). OSPS is the central oversight agency for all State procurement. The Department of Health and Human Services (DHHS) Division of Contract Management (DCM) oversees the solicitation and contract implementation for all DHHS procurement. DCM coordinates with DHHS program personnel to evaluate and select vendors and subrecipients, determine contract terms, and provide required documentation to OSPS. OSPS is responsible for reviewing and approving Procurement Justification Forms (PJFs) submitted by DCM on behalf of program personnel prior to the award of contracts. The PJF represents program personnel’s assertion that the selected procurement method is appropriate under applicable State and Federal requirements, and that required evaluation procedures have been performed. OSPS must publicly post a NOI for all procurements over $10,000 entered into without a competitive process for a minimum of 7 calendar days prior to the start of the contract. The NOI includes the signed PJF provided to OSPS by DCM. The Office of the State Auditor (OSA) tested 14 contracts, 6 procured competitively and 8 procured noncompetitively, that accounted for $21.6 million of the $35.0 million in TANF procurement-related transactions in fiscal year 2025 and found: • PJFs were reviewed for reasonableness by DCM and OSPS, but DHHS could not provide documentation to support the assertions made by OFI were accurate. • For 7 contracts, DCM provided the PJF to OSPS for their review after the contract had commenced, between 5 and 109 days after the contract start date. For 12 contracts, OSPS approved the PJF after the contract commenced, between 11 and 159 days after the contract start date. For 1 contract, the PJF was not provided. • For 2 noncompetitive contracts, OSPS posted the NOI after contract performance had already commenced, between 44 and 59 days after the contract start date. For both of these contracts, services had been initiated and financial obligations incurred prior to the NOI. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the Department expended $35.0 million in procurement-related transactions from TANF funds of $100.2 million. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and future disallowances • Noncompliance with Federal and State procurement requirements, including NOI posting requirements, could result in the need to void a contract or exposure to legal proceedings. Recommendation: We recommend that OSPS: • increase agency awareness of the procedures related to the timing of procurement contract documentation being submitted to OSPS for review prior to the contract start date; and • finalize and implement an updated procurement policy and procedure manual that identifies the parties responsible for key aspects of the procurement process. We also recommend that DCM and OFI develop policies and procedures and increase oversight to ensure all procurement transactions comply with Federal and State requirements, including: • DCM obtaining and reviewing documentation to support the assertions made by OFI for accuracy and reasonableness; and • ensuring PJFs are completed, reviewed, and submitted to OSPS prior to the contract start date. Corrective Action Plan: See F-24 Management’s Response: DAFS Response: The Department agrees with this finding. OSPS does not authorize, encourage, or approve agencies allowing vendors to perform work at risk. However, OSPS also does not delay review and approval solely due to contract start-date issues, as doing so would increase the State’s risk exposure, potentially disrupt federally required programs, and hinder agencies’ compliance with federal period-of-performance requirements. To address these concerns, OSPS will formalize and issue policy guidance that clearly defines agency and OSPS roles and responsibilities in the contracting process. This guidance will expand the agency-focused section to emphasize timely submission and processing, along with the risks and implications associated with contracting delays. In advance of fiscal year-end, OSPS will issue a separate policy document and companion guidance as a spotlight topic in the monthly newsletter and posted to the intranet for agency reference. DAFS Contact: David Morris, Acting Chief Procurement Officer, OSPS, 207-624-7335 DHHS Response: The Department partially agrees with this finding. There is not a requirement to provide documentation that the Department personnel’s assertions are accurate regarding Department personnel’s review of PJFs. The Department agrees that it can improve the timing of procurement documents in relation to the start dates of the contracts. Extenuating circumstances exist periodically that prevent the timeliness of these documents. In some cases, there are delays in the grant approval at the Federal level. Delays in Legislative approval of budgets can also lead to procurement documentation delays. DHHS Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Absent adequate documentation to support the veracity of the assertions made on the PJF by program personnel, the best value for the State cannot be ensured. The finding remains as stated. (State Number: 25-1111-10)
(2025-041) Title: Internal control over TANF client payments needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 263.11 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must use Federal Temporary Assistance for Needy Families (TANF) funds for expenditures that are reasonably calculated to accomplish the purposes of TANF. Use of funds in violation of this is considered misuse of funds. Condition: The TANF program provides time-limited assistance to needy families with children so that the children can be cared for in their own homes or in the homes of relatives; to end dependence of needy parents on government benefits by promoting job preparation, work, and marriage; to prevent out-of-wedlock pregnancies, including establishing prevention and reduction goals; and to encourage the formation and maintenance of two-parent families. The Department issues monthly cash benefits to TANF clients while they work towards self-sufficiency. The Department also issues TANF support service payments directly to TANF clients for various items and services, and to providers on behalf of TANF clients for services rendered such as childcare and transportation. The Office of the State Auditor (OSA) tested 60 cash benefits and 60 support service payments and found: • 1 cash benefit issued in March 2025 did not include all members of the household, resulting in an underpayment of $395. Upon further review, OSA found an additional $3,843 underpaid to the client during fiscal year 2025. • 2 support service payments issued for transportation were calculated by the Department using a distance other than the most direct route as required. The payments included: o one payment issued in November 2024 that overpaid a TANF client $3. Upon further review, OSA found an additional $15 overpaid to the client during fiscal year 2025. o one payment issued in September 2024 that underpaid a TANF client $3. Upon further review, OSA found an additional $11 underpaid to the client during fiscal year 2025. • 1 support service payment overpaid a childcare provider by $2. Upon further review, OSA found an additional $8 that was overpaid to the provider during fiscal year 2025. OSA selected non-statistical random samples. Context: In fiscal year 2025, $51.7 million from a total of $104.9 million was paid to TANF clients for services and direct cash benefits. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department: • implement additional procedures to ensure that payments made to TANF clients are accurate, allowable, and adequately documented; • increase monitoring procedures over these payments; • establish recoupments for the identified overpayments; and • issue benefits/payments to clients or providers for identified underpayments. Corrective Action Plan: See F-23 Management’s Response: The Department agrees with this finding. Actions have been taken to issue corrective payments for benefits that were underpaid and benefits that were overpaid have been referred for recoupment. The Corrective Action Plan will mitigate the agreed upon errors from reoccurring. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 25-1111-06)
(2025-042) Title: Internal control over Income Eligibility and Verification System procedures needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 205.55 and .56 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to comply with Federal Income Eligibility and Verification System (IEVS) exchange rules and regulations in accordance with program agreements. The Department is required to request through IEVS: • wage information from the State Wage Information Collection Agency for all applicants at the first opportunity following receipt of the application and for all recipients on a quarterly basis; • unemployment compensation information from the agency administering the State’s unemployment compensation program; • all available information maintained by the Social Security Administration; • unearned income information from the Internal Revenue Service; and • any income or other information affecting eligibility available from agencies in the State or other states. The Department is required to resolve all discrepancies identified through IEVS reports within 45 days of receipt. Condition: IEVS is used to exchange information among State and Federal agencies to verify various information needed to determine eligibility for Federal financial assistance. This information is updated in the Automated Client Eligibility System (ACES) to ensure eligibility determinations are made based on current information. IEVS generates various discrepancy reports on a weekly, monthly, and quarterly basis. The Department is required to review reports and resolve all discrepancies identified through IEVS within 45 days of report receipt and document the resolution in ACES. The Department determined that the value of Quarterly Income Discrepancy Reports is limited because discrepancy information is available through other sources on a more frequent basis. As a result, the Department did not allocate resources to completing reviews of these quarterly reports during fiscal year 2025. Context: A total of 224 IEVS reports are required to be generated annually. Of the 224 reports generated, reviews for 4 quarterly reports were not completed during fiscal year 2025. The number of Temporary Assistance for Needy Families (TANF) discrepancies on each report can vary. Cause: Lack of resources Effect: • IEVS information may not be updated timely in ACES, which could affect program eligibility. • Failure to maintain documentation to support compliance with required TANF exchange rules may result in the U.S. Department of Health and Human Services penalizing the State up to 2 percent of the grant award. Recommendation: We recommend that the Department allocate resources to ensure that all reviews are completed and discrepancies identified through IEVS are resolved timely and documented in ACES. Corrective Action Plan: See F-23 Management’s Response: The Department agrees with this finding. The Corrective Action Plan from SFY 2024 included the dedication of staff resources to complete the review of the quarterly income discrepancy report effective for SFY 2026. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 25-1111-03)
(2025-043) Title: Internal control over TANF subrecipient risk evaluation procedures needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in 2 CFR 200.332. Condition: The Department is required to evaluate each subrecipient’s risk of noncompliance with Federal regulations for the purpose of determining the appropriate level of subrecipient monitoring to be performed. Subrecipient monitoring activities include, but are not limited to, review of financial and performance reports submitted by the subrecipient, periodic site visits, ensuring required audits of the subrecipient are completed, and ensuring that corrective action is taken for any deficiencies identified through the aforementioned procedures. These procedures are necessary to ensure the subrecipient is in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. The Department provided evidence to support that subrecipient monitoring procedures were performed; however, documentation that risk evaluation procedures performed corresponded to the appropriate level of monitoring activities could not be provided. Context: The Department provided $35.0 million from a total of $104.9 million to TANF subrecipients during fiscal year 2025. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. Recommendation: We recommend that the Department implement policies and procedures that require evaluation of each subrecipient’s risk of noncompliance specifically for the purposes of determining the appropriate subrecipient monitoring to be performed. This will ensure subrecipients are monitored appropriately based on risk designation. Corrective Action Plan: See F-23 Management’s Response: The Department disagrees with this finding. The Department evaluates risk on its subrecipients for the purposes of determining the appropriate subrecipient monitoring in multiple ways. The first assessment of risk is when a subaward is competitively bid. The second assessment of risk is built into the Maine Uniform Accounting and Auditing Practices for Community Agencies (MAAP) in which higher risk subrecipients undergo a higher level of testing by Independent Public Accountants. Finally, the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: 2 CFR 200.332(b) states that the Department must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. The Department has indicated in Management’s Response that the criteria set forth in 2 CFR 200.332(b) have been met; however, the following rebuttals illustrate that the Department is not in compliance with Federal requirements: • The Department identifies the first assessment of risk: when a subaward is competitively bid. o While OSA acknowledges this does occur, not all subawards are competitively bid. o The level of subrecipient monitoring that the Department performs is based on the services provided, not on specific subrecipients, as required. • The Department identifies the second assessment of risk: built into MAAP in which higher risk subrecipients undergo a higher level of testing by independent public accountants. o A subrecipient deemed higher risk as the result of a risk evaluation in accordance with 2 CFR 200.332 may not be deemed higher risk in accordance with MAAP standards. • The Department identifies the third assessment of risk: the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. o The Department did not provide documentation to demonstrate that these procedures are performed as a result of a risk evaluation. The Department’s existing policies and procedures do not require nor provide support for the evaluation of each subrecipient’s risk of noncompliance specifically for the purpose of determining the appropriate subrecipient monitoring to be performed. The finding remains as stated. (State Number: 25-1111-02)
(2025-044) Title: Internal control over TANF performance reporting procedures needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 261.60 through .62; 45 CFR 265.7 and .8 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain adequate documentation, perform adequate verification, and implement other control procedures for Temporary Assistance for Needy Families (TANF) client work participation. Work participation activities include unsubsidized employment, job search and job readiness, job skills training directly related to employment, vocational education, and other work-related programs. The Department must report the actual hours that a work-eligible TANF client participates in these work-related activities, on the ACF-199 TANF Data Report on a quarterly basis. These reports are required by the Federal government. Condition: The Department must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of information reported to the Federal government and used to calculate work participation rates. The Department utilizes a vendor for case management services and development of individualized training and employment plans for Additional Support for People in Retraining and Employment (ASPIRE) clients. These services directly impact and enforce client work participation requirements. Vendor data is exchanged with the Department on a monthly basis and is utilized in conjunction with client data in the Automated Client Eligibility System to comprise client work participation data that is reported on the ACF-199 report to the Federal government. The Department reported incorrect work participation information on the ACF-199 report. Of the 30 clients tested by the Office of the State Auditor (OSA), 23 inaccurate work participation data elements were reported for 19 clients, including inaccurate: • parent with minor child status for 13 cases; • unsubsidized employment hours for 4 cases; • countable months towards the Federal time limit of 60 months for 3 cases; • relationship to head of household status for 1 case; • community service program hours for 1 case; and • education related to employment with no high school diploma indicator for 1 case. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the number of families reported on the ACF-199 report ranged from 11,000 to 12,000 per quarter. Cause: • Lack of adequate procedures to ensure accurate reporting • Lack of supervisory oversight Effect: Inaccurate work participation data reported to the Federal government may affect the Federal requirement for TANF’s State Maintenance of Effort. Recommendation: We recommend that the Department enhance existing procedures to ensure that the information reported on the ACF-199 report is accurate and complete prior to submission to the Federal government. Corrective Action Plan: See F-24 Management’s Response: The Department agrees with this finding. The Corrective Action Plan will mitigate the agreed upon errors from reoccurring. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 25-1111-04)
(2025-045) Title: Internal control over TANF work verification plan procedures needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 261.60 through .65; Work Verification Plan for the State of Maine The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain adequate documentation, perform adequate verification, and implement other control procedures for Temporary Assistance for Needy Families (TANF) client work participation. Work participation activities include unsubsidized employment, job search and job readiness, job skills training directly related to employment, vocational education, and other work-related programs. The Work Verification Plan for the State of Maine requires Additional Support for People in Retraining and Employment (ASPIRE) supervisors to review a minimum of 5 random cases per regional office per month. ASPIRE Case Review Tool (ACRT) reviews are intended to validate all case data to include (but not limited to) work assessment, appropriateness of the individual work plan, work verification data consistency, documentation, and work plan outcomes. Accuracy of all aspects of the individual cases is assessed as part of these reviews, including participation activity/hours documentation. Condition: The ASPIRE program helps TANF recipients move towards financial independence through case management, job training, education, support, and employment services. The Department contracts with a subrecipient service provider to perform outreach and case management services for the ASPIRE program. ASPIRE supervisors perform ACRT reviews of client case activity recorded by its subrecipient service provider to ensure that all case data including, but not limited to, work participation rate data is documented, verified, and reported in accordance with work verification plan requirements. The Office of the State Auditor (OSA) tested 40 ACRT reviews performed during fiscal year 2025 and found: • 2 reviews did not indicate the date the review was performed. As a result, OSA could not determine whether follow up was timely. • 2 reviews did not document activities and verification of activities to support compliance with work verification activities. • 3 reviews did not follow up with the subrecipient service provider timely. Follow-up meetings took place between 3 and 8 months after the initial review. • one review did not ensure the subrecipient service provider addressed all actionable items. OSA selected a non-statistical random sample. Additionally, the Department did not adhere to the Work Verification Plan’s requirement to review a minimum of 5 random cases per regional office per month; instead, ACRT reviews were performed based on each regional office’s caseload. Furthermore, ACRT reviews were not performed for the months of December 2024 and January 2025, and only 33 of the 65 required monthly ACRT reviews were performed for February 2025. Finally, a component of work verification plan requirements states that work participation data is required to be accurately reported on the ACF-199 TANF Data Report to the Federal government. OSA identified a significant deficiency as issued in finding 2025-044 for inaccurate work participation data reported on the ACF-199 report. Therefore, since work participation rate data was not documented, verified, or reported in accordance with the State’s work verification plan, the Department is not in compliance with Federal work verification plan requirements. Context: The Department must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of information reported to the Federal government and used to calculate work participation rates. Cause: • Lack of adequate oversight procedures to ensure that ACRT reviews are accurate and complete and work verification plan requirements are met • Revisions to the method of selecting cases for review from 5 random cases per regional office per month to an allocation based on each regional office’s caseload were not incorporated into the Work Verification Plan. • The subrecipient service provider contract was renegotiated during fiscal year 2025, which resulted in revisions to the ACRT and a pause on ACRT reviews. Effect: The Federal government may penalize the State by an amount not less than 1 percent and not more than 5 percent of the grant award for violation of work verification plan requirements. Recommendation: We recommend that the Department enhance existing procedures and oversight to ensure that work verification plan requirements are met. This should include: • confirming that ACRT reviews are performed accurately and completely, which will ensure the reliability of client data used to calculate work participation rates reported to the Federal government; and • updating the Work Verification Plan to accurately reflect the ACRT case review selection criteria as deemed necessary. Corrective Action Plan: See F-24 Management’s Response: The Department agrees with this finding. The Department agrees with the exceptions identified as a result of a non-statistical random sample. The Corrective Action Plan will mitigate the agreed upon errors from reoccurring. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 25-1111-01)
(2025-047) Title: Internal control over TANF subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition: The Department is required to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes. Subrecipient monitoring activities include, but are not limited to, review of financial and performance reports submitted by the subrecipient, periodic site visits, ensuring required audits of the subrecipient are completed, and ensuring that corrective action is taken for any deficiencies identified through the aforementioned procedures. These procedures are necessary to ensure the subrecipient is in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. The Office of the State Auditor (OSA) tested 9 contracts issued to Temporary Assistance for Needy Families (TANF) subrecipients and found that documentation could not be provided to support that: • required performance reports were received and that appropriate action was taken in response for 4 contracts; and • required reports were reviewed for 6 contracts. OSA determined that payments made to subrecipients for the aforementioned reporting deficiencies were allowable based upon subsequent reports and other monitoring procedures performed. OSA selected a non-statistical random sample. Context: The Department provided $35.0 million from a total of $104.9 million to TANF subrecipients during fiscal year 2025. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Noncompliance with the Federal statutes, regulations, and the terms and conditions of the subaward by subrecipients may go undetected. • Potential future questioned costs and disallowances Recommendation: We recommend that the Department implement policies and procedures to ensure that all required reports are received from subrecipients and reviewed by program personnel, and that appropriate action is taken to address any deficiencies identified through subrecipient monitoring. Corrective Action Plan: See F-25 Management’s Response: The Department agrees with this finding. The Department will create a process to ensure the documentation of the review of sub-recipient performance reports. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 25-1111-08)
(2025-048) Title: Internal control over Child Support Services expenditures needs improvement Prior Year Findings: None State Department: Health and Human Services Administrative and Financial Services Judicial Branch State Bureau: Office for Family Independence Health and Human Services Service Center Administrative Office of the Courts Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Child Support Services Assistance Listing Number: 93.563 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302 and .403; Cooperative Agreement between the State of Maine Department of Health and Human Services (DHHS) and Maine State Judicial Branch for State Fiscal Years 2024 and 2025, Article V, Section B.3 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Costs must be adequately documented. The State’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to determine that such funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. The Administrative Office of the Courts (AOC) must provide a report to the DHHS Division of Support Enforcement and Recovery (DSER) for all Judicial Branch estimated expenditures. This report must detail costs that are eligible for Federal financial participation and must be provided within 60 calendar days after the close of the quarters ending in March, June, September, and December. These estimated expenditures are calculated using the per minute rate that was in effect for the prior fiscal year. By November 30th, the Judicial Branch will update the per minute rate and provide DSER a report with actual expenditures for the State fiscal year. Condition: The Child Support Services (CSS) program is administered by DSER. DHHS has a cooperative agreement with AOC that defines roles, relationships, and responsibilities of the parties, and sets forth a basis for financial reimbursement for court services provided to DHHS by AOC. These services include conducting paternity hearings; hearings to establish, modify, or enforce support orders; civil and criminal complaint hearings related to CSS; providing mediation services; and conducting proceedings related to income withholding responsibilities. AOC sends monthly invoices to the DHHS Service Center (DHHS SC) with estimated costs for work performed for the CSS program. DHHS SC is responsible for transferring funds from the CSS program to AOC on the following schedule: • On a quarterly basis, AOC provides DHHS SC with a reconciliation of estimated costs based on assigned caseload. This quarterly reconciliation utilizes the per minute rate that was in effect for the prior fiscal year and is due 60 days after the close of the quarter. • Annually, the per minute rate is updated and AOC provides DHHS SC with a final report of actual costs with the updated per minute rate. This final report is due by November 30th each year. Upon receipt of the final report, a final payment/reimbursement will be issued to reconcile to actual costs. The Office of the State Auditor (OSA) tested 7 transfers from DHHS SC to AOC and found that costs incurred for court services were not adequately supported, as follows: • DHHS SC did not receive 1 quarterly report from AOC; therefore, court expenditures were based on estimated costs rather than actual costs. • The annual report and reconciliation of estimated costs to actual costs was not complete; AOC updated minutes charged but the actual cost per minute rate was not updated. Therefore, expenditure amounts reported by the CSS program are not based on actual costs and the submitted final report used the estimated cost per minute rate. OSA selected a non-statistical random sample. Context: The CSS program expended $17.7 million in Federal funds during fiscal year 2025, of which $2.7 million was used for court services. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: Since DSER is utilizing the estimated cost per minute instead of the actual cost per minute: • CSS program expenditures could be misstated; and • the State may not be in compliance with State matching requirements of 34 percent of actual costs. Recommendation: We recommend that the Departments strengthen policies and procedures and increase oversight to ensure that the CSS program is in compliance with Federal regulations. Corrective Action Plan: See F-26 Management’s Response: The Departments agree with this finding. The Office of the Courts will strengthen policies, procedures, and oversight to ensure that the Child Support Servies program remains in full compliance with Federal regulations by March 31, 2026. Contact: Jerry Joy, Director, Division of Support Enforcement and Recovery, DHHS, 207-624-6985 (State Number: 25-1128-01)
(2025-051) Title: Internal control over CCDF procurement needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Office of State Procurement Services Division of Contract Management Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.317; 5 MRSA 1825-B and D; Office of State Procurement Services (OSPS) policies The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must follow the same policies and procedures it uses for procurements with non-Federal funds. Awards shall be made to the best-value bidder, taking into consideration the best interest of the State. The requirement to competitively bid a contract may be waived if specific criteria is met, including the item or service can only be procured from one source or it is an emergency procurement. Each bid, with the name of the bidder, must be entered on record. Each record, with the successful bid indicated, must be open to public inspection after the letting of the contract. The Department must justify the selection of vendor, either through competitive or noncompetitive process, and provide a detailed explanation of cost, demonstrating how the best value for the State is ensured. The Chief Procurement Officer shall make the public aware of contracts and grants for which bids are being requested and communicate the procedure used in reviewing bids. Contracts must be submitted to OSPS at least 14 days prior to the contract start date. A Notice of Intent to Waive the Competitive Bidding Process (NOI) must be posted to the OSPS website for 7 calendar days prior to the start of a noncompetitively bid contract. Condition: The Child Care and Development Fund (CCDF) Cluster is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. OSPS is the central oversight agency for all State procurement. The Department of Health and Human Services (DHHS) Division of Contract Management (DCM) oversees the solicitation and contract implementation for all DHHS procurement. DCM coordinates with DHHS program personnel to evaluate and select vendors and subrecipients, determine contract terms, and provide required documentation to OSPS. OSPS is responsible for reviewing and approving Procurement Justification Forms (PJFs) submitted by DCM on behalf of program personnel prior to the award of contracts. The PJF represents program personnel’s assertion that the selected procurement method is appropriate under applicable State and Federal requirements, and that required evaluation procedures have been performed. OSPS must publicly post a NOI for all procurements over $10,000 entered into without a competitive process for a minimum of 7 calendar days prior to the start of the contract. The NOI includes the signed PJF provided to OSPS by DCM. The Office of the State Auditor (OSA) tested 13 contracts, 3 procured competitively and 10 procured noncompetitively, that accounted for $10.1 million of the $14.4 million in CCDF program procurement- related transactions in fiscal year 2025 and found: • PJFs were reviewed for reasonableness by DCM and OSPS, but DHHS could not provide documentation to support the assertions made by OCFS were accurate. • For 11 contracts, DCM provided the PJF to OSPS for their review after the contract had commenced, between 7 and 198 days after the contract start date. For 12 contracts, OSPS approved the PJF after the contract commenced, between 12 and 200 days after the contract start date. • For 3 of the noncompetitive contracts, OSPS posted the NOI after contract performance had commenced, between 12 and 208 days after the contract start date. For all 3 contracts, services had been initiated and financial obligations incurred prior to the NOI. OSA utilized a risk-based approach to select 2 contracts issued by OCFS and a non-statistical random sample of all other contracts. Context: In fiscal year 2025, the Department expended $14.4 million in procurement-related transactions from CCDF funds of $45.1 million. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and future disallowances • Noncompliance with Federal and State procurement requirements, including NOI posting requirements, could result in the need to void a contract or exposure to legal proceedings. Recommendation: We recommend that OSPS: • increase agency awareness of the procedures related to the timing of procurement contract documentation being submitted to OSPS for review prior to the contract start date; and • finalize and implement an updated procurement policy and procedure manual that identifies the parties responsible for key aspects of the procurement process. We also recommend that DCM and OCFS develop policies and procedures and increase oversight to ensure all procurement transactions comply with Federal and State requirements, including: • DCM obtaining and reviewing documentation to support the assertions made by OCFS for accuracy and reasonableness; and • ensuring PJFs are completed, reviewed, and submitted to OSPS prior to the contract start date. Corrective Action Plan: See F-26 Management’s Response: DAFS Response: The Department agrees with this finding. OSPS does not authorize, encourage, or approve agencies allowing vendors to perform work at risk. However, OSPS also does not delay review and approval solely due to contract start-date issues, as doing so would increase the State’s risk exposure, potentially disrupt federally required programs, and hinder agencies’ compliance with federal period-of-performance requirements. To address these concerns, OSPS will formalize and issue policy guidance that clearly defines agency and OSPS roles and responsibilities in the contracting process. This guidance will expand the agency-focused section to emphasize timely submission and processing, along with the risks and implications associated with contracting delays. In advance of fiscal year-end, OSPS will issue a separate policy document and companion guidance as a spotlight topic in the monthly newsletter and posted to the intranet for agency reference. DAFS Contact: David Morris, Acting Chief Procurement Officer, OSPS, 207-624-7335 DHHS Response: The Department partially agrees with this finding. There is not a requirement to provide documentation that the Department personnel’s assertions are accurate regarding Department personnel’s review of PJFs. The Department agrees that it can improve the timing of procurement documents in relation to the start dates of the contracts. Extenuating circumstances exist periodically that prevent the timeliness of these documents. In some cases, there are delays in the grant approval at the Federal level. Delays in Legislative approval of budgets can also lead to procurement documentation delays. DHHS Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Absent adequate documentation to support the veracity of the assertions made on the PJF by program personnel, the best value for the State cannot be ensured. The finding remains as stated. (State Number: 25-1114-06)
(2025-049) Title: Internal control over CCDF financial reporting needs improvement Prior Year Findings: See Schedule of findings and Questioned Costs for chart/table State Department: Health and Human Services Administrative and Financial Services State Bureau: Office of Child and Family Services Health and Human Services Service Center Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.50 and .65 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department shall submit financial reports to the Administration for Children & Families (ACF) quarterly for each fiscal year until funds are expended. At a minimum, a state’s quarterly report shall include the following information on expenditures under Child Care and Development Fund (CCDF) grant funds: • Childcare administration • Quality activities, including any sub-categories of quality activities as required by ACF • Direct services for both grant or contracted slots and certificates • Non-direct services, including establishment and maintenance of computerized childcare information systems, certificate program cost/eligibility determination, and all other non-direct services • Such other information as specified Pursuant to CCDF regulations at 45 CFR 98.65(g), and as part of the terms and conditions of the grant award, states and territories are required to complete and submit a quarterly financial status report (ACF-696). The direct services category consists solely of expenditures for childcare subsidies to eligible children. The costs of eligibility determination and re-determination are considered a non-direct service activity and should be reported separately. Non-direct services are the costs of providing childcare subsidies or other activities not considered administrative costs. Condition: The CCDF program is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. The program had 3 ongoing Federal grant award years during fiscal year 2025, for grant years 2023, 2024, and 2025. For each grant award, quarterly CCDF ACF-696 financial status reports are required. The Department of Health and Human Services’ Service Center (DHHS SC) prepares and submits quarterly ACF-696 reports on behalf of OCFS. DHHS SC utilizes a spreadsheet designed by OCFS to track and summarize expenditure information and related earmarking requirements, and to prepare the ACF-696 reports. The Office of the State Auditor (OSA) reviewed all quarterly ACF-696 reports required to be filed during fiscal year 2025 and found that in all the required reports filed, the amount reported as direct expenditures included amounts that were not for childcare subsidies. Reported direct expenditures erroneously included non-direct costs related to the establishment of a new computerized childcare information system, costs of eligibility determinations, and costs associated with error rate reporting requirements. In addition, OSA reviewed 1 revised report filed during fiscal year 2025, in response to prior year finding 2024-059, that properly reported direct and indirect amounts on the correct reporting lines. Context: CCDF expenditures totaled $45.1 million for fiscal year 2025. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: Noncompliance with Federal reporting requirements Recommendation: We recommend that the Departments enhance existing procedures and increase oversight to ensure that all information reported on quarterly ACF-696 reports is accurate and complete prior to submission to the Federal government. Corrective Action Plan: See F-25 Management’s Response: The Departments agree with this finding. The DHHS Financial Service Center updated existing procedures and increased oversight to ensure that all information reported on quarterly ACF-696 reports is accurate and complete prior to submission to the Federal government. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 25-1114-03)
(2025-050) Title: Internal control over CCDF provider health and safety requirements needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.33, .41, .42, and .68 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to disseminate to the general public, through a consumer-friendly and easily accessible website, results of monitoring and inspection reports for all eligible and licensed childcare providers. Full monitoring and inspection reports must be posted timely. The Department is required to design, implement, and enforce health and safety requirements for the protection of children. Unannounced inspections of childcare providers and facilities, performed by licensing inspectors, are required not less than annually to ensure compliance with all childcare licensing and health and safety standards. In the Child Care and Development Fund (CCDF) State Plan, the Department is required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. OCFS completes annual childcare provider site visits or licensing inspections for providers receiving subsidies from the CCDF program. During site visits and licensing inspections, OCFS personnel review Federal program health and safety requirements using a provider compliance checklist. Any deficiencies are noted, corrective action by the provider is required, and the frequency of site visits or licensing inspections is increased until remediation of noted deficiencies is complete. The Office of the State Auditor (OSA) tested 60 providers subject to health and safety site visits or licensing inspections and identified: • 1 provider facility inspection was noted in the provider file as complete; however, the completed inspection report was not posted publicly as required. • 2 provider facilities’ annual unannounced site visits did not occur within the required timeframe. OSA selected a non-statistical random sample. Context: The Department provided approximately $26 million to CCDF program childcare providers in fiscal year 2025. Cause: • Lack of resources • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Providers not meeting CCDF program regulations for health and safety may go undetected. Recommendation: We recommend that OCFS enhance oversight to ensure that: • annual childcare provider site visits and licensing inspections are performed timely; and • all inspection reports, including corrective action, are posted publicly. Corrective Action Plan: See F-26 Management’s Response: The Department agrees with this finding. The Department acknowledges that two facilities annual unannounced inspections did not occur within 12 months, being 3 days and 10 days past due. The Department also agrees with the finding that one facility inspection was not posted publicly. Contact: Janet Whitten, CLIS Program Manager, OCFS, DHHS, 207-441-2259 (State Number: 25-1114-02)
(2025-052) Title: Internal control over CCDF eligibility determinations needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Eligibility Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.21, .100, and .101 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must have procedures in place for verifying eligibility for children receiving Child Care and Development Fund (CCDF) subsidies in accordance with Federal eligibility requirements, as well as the specific eligibility requirements selected by each lead agency in its approved State plan. The Department is required to calculate, prepare, and submit to the Federal government a triennial report of errors occurring in the administration of CCDF grant funds. States must use this report to calculate error rates, which is defined as the percentage of cases with an error, the percentage of cases with an improper payment, the percentage of improper payments, the average amount of improper payment, and the estimated amount of improper payments. Improper payments include any payment of CCDF grant funds to an ineligible recipient or for an ineligible service, any duplicate payment of CCDF grant funds, and payments of CCDF grant funds for services not received. In preparing the error reports, the Department shall conduct comprehensive reviews of case records by selecting a random sample of case records which is estimated to achieve the calculation of an estimated annual amount of improper payments with a 90 percent confidence interval of 5 percent. Condition: The CCDF program is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. CCDF provides childcare benefits to parents based on financial and program eligibility factors. Eligibility for benefits is determined based on application information from families through the childcare management system. On a monthly basis, the Department’s Quality Assurance Team performs Quality Control Reviews (QCRs) of a random sample of cases to review eligibility determinations and benefit amounts. The Department tracks error rates of improper payments which are reported to the Federal government on a triennial basis on the ACF-404 State Improper Payments Report. The Department did not perform QCRs in April and May 2025. Context: The Department did not perform 46 of the 276 required QCRs in fiscal year 2025. The Department provided $25.9 million in CCDF provider payments from total CCDF program expenditures of $45.1 million in fiscal year 2025. Cause: • Lack of adequate oversight procedures to ensure monthly QCRs are performed • Lack of resources Effect: • CCDF provider payments may be incorrectly calculated, resulting in households being underpaid and/or overpaid. • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance existing oversight procedures to ensure that eligibility for children receiving CCDF subsidies is in accordance with Federal requirements. This should include confirming that QCRs are performed monthly as required. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. During the rollout of the Baxter child care management system, a system error prevented the random selection of cases needed for monthly Quality Assurance (QA) audits. As a result, the 46 QA reviews scheduled for May and June 2025 were not completed. The issue was promptly identified, corrected, and normal QA activity resumed in July 2025. The Department would like to note that Maine’s QA process significantly exceeds federal requirements. While federal rules require 276 case reviews over a three‑year cycle, Maine reviews 276 cases annually—totaling approximately 828 over three years. Even with the missed 46 cases, the Department will complete 782 reviews this cycle, remaining well above federal minimums. Contact: Gina Forbes, Child Care Services Program Manager, OCFS, DHHS, 207-592-0865 Auditor’s Concluding Remarks: The Department agrees with the finding but states that “Maine’s QA process significantly exceeds federal requirements. While federal rules require 276 case reviews over a three‑year cycle, Maine reviews 276 cases annually—totaling approximately 828 over three years.” The Department is erroneously referencing ACF-404 reporting requirements rather than the controls they are relying on to ensure compliance over eligibility requirements, which have been documented in the Federally-approved State plan. Since the random sample of QCRs performed by the Department are based on initial eligibility determinations, adequate controls were not in place over initial eligibility determinations made in April and May 2025. The finding remains as stated. (State Number: 25-1114-01)
(2025-053) Title: Internal control over CCDF subrecipient cash management needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Child Care and Development Fund (CCDF) program is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. The Department makes equal advance monthly payments to subrecipients and then reconciles those amounts to quarterly financial reports submitted by the subrecipient. This procedure does not consider the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and OCFS’ subrecipient monitoring procedures do not include a review of subrecipient compliance with cash management requirements. As a result, OCFS procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: OCFS provided $2.8 million from a total of $45.1 million to CCDF program subrecipients during fiscal year 2025. Cause: • Lack of adequate subrecipient monitoring procedures • Lack of centralized oversight of subrecipient monitoring Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that OCFS implement monitoring procedures over subrecipient cash management requirements to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for the CCDF program. Corrective Action Plan: See F-27 Management’s Response: The Department disagrees with this finding. The Department is in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement of the funds. Payments are made as close as is administratively feasible. The Compliance Supplement suggested audit procedures for Cash Management for pass-through entities refers to 200.305(b)(1) ...that same paragraph states that the timing and amount of advance payments must be as close as is administratively feasible. Contact: Tara Williams, Associate Director of Early Care & Education, OCFS, DHHS, 207-557-2342 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation emphasizes a single sentence from the broader paragraph, omitting context that informs the regulation’s full intent. According to the 2025 Compliance Supplement, pass-through entities must monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and their disbursement for program purposes is minimized as required by the applicable cash management requirements in the Federal award to the recipient (2 CFR 200.305(b)(1)). 2 CFR 200.305(b)(1) states that the recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. The Department references the phrase “as close as is administratively feasible” to justify their current process; however, this phrase is part of a broader requirement that establishes specific conditions for advance payments. The regulation requires that the timing between when the subrecipient receives Federal funds from the State and when the subrecipient disburses those funds is closely monitored to ensure that disbursements align with actual, immediate cash needs. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. The finding remains as stated. (State Number: 25-1114-04)
(2025-054) Title: Internal control over CCDF subrecipient risk evaluation procedures needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in 2 CFR 200.332. Condition: The Child Care and Development Fund (CCDF) program is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. The CCDF program contracts with subrecipients to administer the First 4 ME Pilot Project, a community-based, coordinated birth through kindergarten entry program which provides comprehensive, high-quality early child care and education to support a child’s school readiness. The Department is required to evaluate each subrecipient’s risk of noncompliance with Federal regulations for the purpose of determining the appropriate level of subrecipient monitoring to be performed. Subrecipient monitoring activities include, but are not limited to, review of financial and performance reports submitted by the subrecipient, periodic site visits, ensuring required audits of the subrecipient are completed, and ensuring that corrective action is taken for any deficiencies identified through the aforementioned procedures. These procedures are necessary to ensure the subrecipient is in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. The Department provided evidence to support that subrecipient monitoring procedures were performed; however, documentation that risk evaluation procedures performed corresponded to the appropriate level of monitoring activities could not be provided. Context: The Department provided $2.8 million from a total of $45.1 million to CCDF subrecipients during fiscal year 2025. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. Recommendation: We recommend that the Department implement policies and procedures that require evaluation of each subrecipient’s risk of noncompliance specifically for the purposes of determining the appropriate subrecipient monitoring to be performed. This will ensure that subrecipients are monitored appropriately based on risk designation. Corrective Action Plan: See F-27 Management’s Response: The Department disagrees with this finding. The Department evaluates risk on its subrecipients for the purposes of determining the appropriate subrecipient monitoring in multiple ways. The first assessment of risk is when a subaward is competitively bid. The second assessment of risk is built into the Maine Uniform Accounting and Auditing Practices for Community Agencies (MAAP) in which higher risk subrecipients undergo a higher level of testing by Independent Public Accountants. Finally, the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 Auditor’s Concluding Remarks: 2 CFR 200.332(b) states that the Department must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. The Department has indicated in Management’s Response that the criteria set forth in 2 CFR 200.332(b) have been met; however, the following rebuttals illustrate that the Department is not in compliance with Federal requirements: • The Department identifies the first assessment of risk: when a subaward is competitively bid. o While the Office of the State Auditor acknowledges this does occur, not all subawards are competitively bid. o The level of subrecipient monitoring that the Department performs is based on the services provided, not on specific subrecipients, as required. • The Department identifies the second assessment of risk: built into MAAP in which higher risk subrecipients undergo a higher level of testing by independent public accountants. o A subrecipient deemed higher risk as the result of a risk evaluation in accordance with 2 CFR 200.332 may not be deemed higher risk in accordance with MAAP standards. • The Department identifies the third assessment of risk: the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. o The Department did not provide documentation to demonstrate that these procedures are performed as a result of a risk evaluation. The Department’s existing policies and procedures do not require nor provide support for the evaluation of each subrecipient’s risk of noncompliance specifically for the purpose of determining the appropriate subrecipient monitoring to be performed. The finding remains as stated. (State Number: 25-1114-05)
(2025-055) Title: Internal control over the Foster Care and Adoption Assistance eligibility and benefit determination process needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Foster Care – Title IV-E Adoption Assistance – Title IV-E Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.658 $51,247 ALN 93.659 $42,689 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during fiscal year 2025 and identified known questioned costs associated with 11 clients based on various eligibility attributes. Since each exception is unique to the client, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 1356.21 and .40; 42 USC 671; Department of Health and Human Services (DHHS) 10-148 Chapter 16 Rules Providing for the Licensing of Family Foster Homes for Children; Office for Child and Family Services’ (OCFS) Financial Resource Specialist (FRS) Policy and Procedure Manual The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. 45 CFR 1356.21 outlines eligibility criteria which, if met, allows the State to pay foster care maintenance payments on behalf of eligible children, in accordance with the Title IV-E agency’s foster care maintenance payment rate schedule, to individuals serving as foster family homes, to childcare institutions, or to public or private child-placement or childcare agencies. 45 CFR 1356.40 outlines eligibility criteria which, if met, allows the State to pay a portion of the Federal Adoption Assistance maintenance payments and claim Federal financial participation for the payment. 42 USC 671 requires that prospective foster parents and any other adult living in the home who has resided in the provider home in the preceding 5 years satisfactorily meet a child abuse and neglect registry check. The requirement applies to foster care maintenance payments made on behalf of the foster child. DHHS 10-148 Chapter 16 Rules Providing for the Licensing of Family Foster Homes for Children states that an application may be denied if the applicant(s) have an open Child Protective Services case or a closed substantiated and/or indicated Child Protective Services case. In addition, applications for renewal of a license shall be made 60 days prior to the date of expiration to ensure that necessary licensing procedures may be completed for the continuity of the license. The OCFS FRS Policy and Procedure Manual defines Supplemental Security Income (SSI) as unearned income; documentation to support unearned income includes benefit award letters, copies of checks, child support printouts, Automated Client Eligibility System (ACES) printouts or other documentation. In addition, a child may be eligible for both SSI and Title IV-E. The Department, through an FRS, must make a decision as to which would yield greater financial benefits for the State. Condition: OCFS administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State as outlined below: • The Foster Care program is designed to help states provide safe and stable out-of-home care for children under its jurisdiction until the children are returned home safely, placed with adoptive families, or placed in other planned arrangements for permanency. • The Adoption Assistance program provides Federal funds to states to facilitate the timely placement of children, whose special needs or circumstances would otherwise make them difficult to place, with adoptive families. Funds are available for a one-time payment to assist with the costs of adopting a child, as well as for subsidies to adoptive families for the care of the eligible child on an ongoing basis. An FRS determines program eligibility and initiates benefits through completion of a determination checklist. The FRS reviews program eligibility factors, gathers required supporting documentation, and documents the certification decision on the checklist. The FRS enters the information into the child welfare information system for processing. Once the client is determined eligible in the child welfare information system, a level of benefits is assigned. OCFS relies on this information and the related system coding to ensure that benefits are accurately provided to eligible clients. OSA tested 60 initial client eligibility determinations and found 1 client’s prospective foster parent did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671 and DHHS Rules Providing for the Licensing of Family Foster Homes for Children. The Resource Family Home (RFH) received $12,566 in Federal Foster Care benefits on behalf of 2 clients, resulting in questioned costs of the entire amount. OSA tested 60 Adoption Assistance benefit payments and 60 Foster Care benefit payments, along with the related eligibility determination for those clients, and found: • 5 clients who were placed in a RFH that the foster/adoptive parent did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671 and DHHS Rules Providing for the Licensing of Family Foster Homes for Children. The RFHs received benefits from both Federal programs on behalf of multiple clients, resulting in questioned costs for the Foster Care and Adoption Assistance programs of $7,629 and $42,689, respectively. • 2 clients determined to be ineligible by OCFS due to a conversion issue within the newly implemented child welfare information system continued to receive Foster Care benefit payments during the fiscal year, resulting in questioned costs of $11,768. • 1 client who received Federal benefits for both Title IV-E and SSI during the fiscal year. OCFS could not provide documentation of their consideration of the SSI documented in ACES, or their decision regarding claiming Title IV-E benefits instead of SSI benefits, resulting in questioned costs for the Foster Care program of $12,687. • 1 client determined ineligible due to an inactive license for 6 months past the initial renewal period, continued to receive Foster Care benefit payments during the fiscal year, resulting in questioned costs for the Foster Care program of $6,447. • 1 client received a one-time payment to adjust Adoption Assistance childcare benefits; however, it was paid out of Foster Care benefits, resulting in questioned costs of $150. OSA selected non-statistical random samples. Context: In fiscal year 2025, the State provided approximately: • 1,000 Foster Care clients with $5.3 million in Federal benefits; and • 4,500 Adoption Assistance clients with $25.5 million in Federal benefits. Identified Cause: • Lack of adequate policies and procedures • Lack of appropriate oversight over eligibility and benefit determinations Potential Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits were provided to ineligible clients. • Noncompliance with Federal regulations Recommendation: We recommend that the Department: • implement additional procedures to ensure that payments made on behalf of clients are accurate and allowable in accordance with program regulations; • establish recoupments for the overpayments identified; and • strengthen licensing practices for background screening of potential and current RFHs. Corrective Action Plan: See F-28 Management’s Response: The Department partially agrees with this finding. OCFS disagrees with the condition that child abuse and neglect registry checks for RFH require a denial. According to State of Maine Department of Health and Human Services Chapter 16 Rules Providing for the Licensing of Family Foster Homes for Children: Section 9: Licensing Requirements for Family Foster Homes for Children, Sect A. (9): An application may be denied if the applicant(s) have an open Child Protective Services Case or a closed substantiated and/or indicated Child Protective Services case. An open Child Protective Services Case includes a pending disposition of an open report, a case open for assessment or a case open for services. OCFS also disagrees with the condition that Title IV-E was claimed in error during their foster care placement, since the Social Security Administration (SSA) did not stop SSI payments to the biological parent, and is requiring OCFS to pay back the Title IV-E funding that was received to help pay for the child's care. This is an error of the SSA office that DHHS has no responsibility over. DHHS reports all children removed from their parents’ custody to SSA through a monthly federally required reporting process. SSA would be responsible for taking any action based on that reporting. DHHS does not agree that Maine taxpayers should be penalized for the federal agency's failure to take action and stop benefits to the parent. OCFS agrees to the remaining conditions noting that: Changes were made to the Katahdin system (User story 3002158) that were released on 8/3/2025 to avoid overlapping payments for childcare in both Foster Care and Adoption. Changes were made to the OCFS Licensing policy in July 2025, removing the 60-day time limit on the license renewal process. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 Auditor’s Concluding Remarks: Regarding the exceptions related to child abuse and neglect registry checks for RFHs, OCFS is only citing State policy and omitting the Federal requirement (42 USC 671) which states that prospective foster parents and any other adult living in the home who has resided in the provider home in the preceding 5 years satisfactorily meet a child abuse and neglect registry check. For all 5 clients in the Condition, the foster/adoptive parent did not satisfactorily meet a child abuse and neglect registry check; 2 of the 5 clients were subsequently removed from the RFH as a result of the child abuse and neglect registry checks. Regarding the client who received both SSI and Federal Title IV-E benefits, though OCFS states that this exception is SSA’s responsibility, the FRS did not properly identify that the client was receiving SSI benefits when determining Foster Care eligibility. As a result, the FRS did not decide which benefit would yield greater financial benefits for the State, and the client received Federal benefits from both Title IV-E and SSI during fiscal year 2025. The finding remains as stated. (State Number: 25-1109-03)
(2025-056) Title: Internal control over Foster Care level of care assessments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Foster Care – Title IV-E Assistance Listing Number: 93.658 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.658 $3,003 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during fiscal year 2025 and identified known questioned costs for 1 client based on various level of care (LOC) requirements. Since each exception is unique to the client, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 45 CFR 1356.21; Department of Health and Human Services 10-148, Chapter 14 Rules for LOC for Foster Homes; Office of Child and Family Services’ (OCFS) Child and Family Services Manual The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Title IV-E agency must review, at reasonable, specific, time-limited periods established by the agency, the amount of payments made for foster care maintenance to assure their continued appropriateness, and the amount made to a licensed or approved relative or kinship foster family home is the same as the amount that would have been made if the child was placed in a licensed or approved non-relative foster family home. Within 90 days of placement in a family foster home or a specialized foster home, an initial child assessment will be done by LOC reviewers to determine the child’s level of need. Initial assessments are conducted on children that are new in care and placed in a resource home and on children that have been previously assessed, have transitioned out of residential care, or have been placed in a resource home. This assessment should be conducted within the first 90 days of placement. Condition: OCFS administers the Foster Care – Title IV-E (Foster Care) program for the State and operates under a Federally-approved plan that requires the agency to perform a periodic review of payment rates for Foster Care maintenance payments to ensure the rates remain appropriate. Maintenance payments are issued based on the number of days in a bi-weekly period a child remains in placement. The payment amounts are established by State regulations but vary by the LOC needed for a child. The 2 types of foster homes where a child can be placed are: • a resource home for basic needs. The 2 LOCs are Levels A and B. LOC Level A receives the entry reimbursement rate and Level B receives an increased rate based on the child’s level of need. • a treatment foster care home. The 3 applicable LOCs are Levels C, D, and E. LOC Level C receives the entry reimbursement rate and Levels D and E receive increased rates based on the child’s level of need. OCFS’ schedule for periodic review is as follows: • All LOC levels require an initial 90-day assessment; • LOC Level A children remain at that level until an event triggers a review, or a request for reassessment is made; • LOC Level B children require a reassessment every 12 months; and • LOC Levels C, D, or E children require a reassessment every 6 months. OSA tested 60 cases with Foster Care maintenance payments and found: • 36 clients did not have an initial LOC assessment within 90 days of placement. Initial LOC assessments ranged from 11 to 302 days past the 90-day requirement. • 3 clients did not have an annual reassessment conducted as required for Level B. • 2 clients did not have a 6-month reassessment conducted as required for Levels C, D, and E. • 1 client’s LOC assessment was automatically adjusted by the child welfare information system from a Level A to a Level B, based on draft policies and procedures that have not been formally approved and implemented, resulting in questioned costs of $3,003 for fiscal year 2025. • 1 client’s LOC assessment was not approved by the LOC manager. OSA selected a non-statistical random sample. Context: The Department provided approximately 1,000 Foster Care clients with $5.3 million in Federal maintenance payments in fiscal year 2025. Cause: • Lack of adequate policies and procedures • Lack of resources • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Inaccurate client benefit payments • Noncompliance with Federal regulations Recommendation: We recommend that the Department allocate resources and enhance policies, procedures, and oversight to ensure LOC assessments are performed in accordance with the Federally-approved schedule for LOC assessments. Corrective Action Plan: See F-23 Management’s Response: The Department agrees with this finding. The Office of Child and Family Services has developed and will implement a corrective action plan to address the issues identified. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 (State Number: 25-1109-02)
(2025-057) Title: Internal control over Foster Care procurement needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Office of State Procurement Services Division of Contract Management Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Foster Care – Title IV-E Assistance Listing Number: 93.658 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.317; 5 MRSA 1825-B and D; Office of State Procurement Services (OSPS) policies The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must follow the same policies and procedures it uses for procurements with non-Federal funds. Awards shall be made to the best-value bidder, taking into consideration the best interest of the State. The requirement to competitively bid a contract may be waived if specific criteria is met, including the item or service can only be procured from one source or it is an emergency procurement. Each bid, with the name of the bidder, must be entered on record. Each record, with the successful bid indicated, must be open to public inspection after the letting of the contract. The Department must justify the selection of vendor, either through competitive or noncompetitive process, and provide a detailed explanation of cost, demonstrating how the best value for the State is ensured. The Chief Procurement Officer shall make the public aware of contracts and grants for which bids are being requested and communicate the procedure used in reviewing bids. Contracts must be submitted to OSPS at least 14 days prior to the contract start date. A Notice of Intent to Waive the Competitive Bidding Process (NOI) must be posted to the OSPS website for 7 calendar days prior to the start of a noncompetitively bid contract. Condition: The Foster Care – Title IV-E (Foster Care) program is designed to help states provide safe and stable out-of-home care for children under its jurisdiction until the children are returned home safely, placed with adoptive families, or placed in other planned arrangements for permanency. The Foster Care program is administered by the Office of Child and Family Services (OCFS). OSPS is the central oversight agency for all State procurement. The Department of Health and Human Services (DHHS) Division of Contract Management (DCM) oversees the solicitation and contract implementation for all DHHS procurement. DCM coordinates with DHHS program personnel to evaluate and select vendors and subrecipients, determine contract terms, and provide required documentation to OSPS. OSPS is responsible for reviewing and approving Procurement Justification Forms (PJFs) submitted by DCM on behalf of program personnel prior to the award of contracts. The PJF represents program personnel’s assertion that the selected procurement method is appropriate under applicable State and Federal requirements, and that required evaluation procedures have been performed. OSPS must publicly post a NOI for all procurements over $10,000 entered into without a competitive process for a minimum of 7 calendar days prior to the start of the contract. The NOI includes the signed PJF provided to OSPS by DCM. The Office of the State Auditor (OSA) tested 4 contracts, 1 procured competitively and 3 procured noncompetitively, that accounted for approximately $4 million of the $4.6 million in Foster Care program procurement-related transactions in fiscal year 2025 and found: • PJFs were reviewed for reasonableness by DCM and OSPS, but DHHS could not provide documentation to support the assertions made by OCFS were accurate. • For 1 contract, DCM provided the PJF to OSPS for their review after the contract had commenced, 38 days after the contract start date. For all 4 contracts, OSPS approved the PJF after the contract commenced, between 25 and 60 days after the contract start date. • For 1 of the noncompetitive contracts, OSPS posted the NOI after contract performance had commenced, 40 days after the contract start date. For this contract, services had been initiated and financial obligations incurred prior to the NOI. OSA utilized a risk-based approach to select 2 contracts issued by OCFS and a non-statistical random sample of all other contracts. Context: In fiscal year 2025, the Department expended $4.6 million in procurement-related transactions from Foster Care funds of approximately $12 million. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and future disallowances • Noncompliance with Federal and State procurement requirements, including NOI posting requirements, could result in the need to void a contract or exposure to legal proceedings. Recommendation: We recommend that OSPS: • increase agency awareness of the procedures related to the timing of procurement contract documentation being submitted to OSPS for review prior to the contract start date; and • finalize and implement an updated procurement policy and procedure manual that identifies the parties responsible for key aspects of the procurement process. We also recommend that DCM and OCFS develop policies and procedures and increase oversight to ensure all procurement transactions comply with Federal and State requirements, including: • DCM obtaining and reviewing documentation to support the assertions made by OCFS for accuracy and reasonableness; and • ensuring PJFs are completed, reviewed, and submitted to OSPS prior to the contract start date. Corrective Action Plan: See F-28 Management’s Response: DAFS Response: The Department agrees with this finding. OSPS does not authorize, encourage, or approve agencies allowing vendors to perform work at risk. However, OSPS also does not delay review and approval solely due to contract start-date issues, as doing so would increase the State’s risk exposure, potentially disrupt federally required programs, and hinder agencies’ compliance with federal period-of-performance requirements. To address these concerns, OSPS will formalize and issue policy guidance that clearly defines agency and OSPS roles and responsibilities in the contracting process. This guidance will expand the agency-focused section to emphasize timely submission and processing, along with the risks and implications associated with contracting delays. In advance of fiscal year-end, OSPS will issue a separate policy document and companion guidance as a spotlight topic in the monthly newsletter and posted to the intranet for agency reference. DAFS Contact: David Morris, Acting Chief Procurement Officer, OSPS, 207-624-7335 DHHS Response: The Department partially agrees with this finding. There is not a requirement to provide documentation that the Department personnel’s assertions are accurate regarding Department personnel’s review of PJFs. The Department agrees that it can improve the timing of procurement documents in relation to the start dates of the contracts. Extenuating circumstances exist periodically that prevent the timeliness of these documents. In some cases, there are delays in the grant approval at the Federal level. Delays in Legislative approval of budgets can also lead to procurement documentation delays. DHHS Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Absent adequate documentation to support the veracity of the assertions made on the PJF by program personnel, the best value for the State cannot be ensured. The finding remains as stated. (State Number: 25-1109-04)
(2025-058) Title: Internal control over Foster Care and Adoption Assistance cash management needs improvement Prior Year Findings: None State Department: Health and Human Services Administrative and Financial Services State Bureau: Office of Child and Family Services Health and Human Services Service Center Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Foster Care – Title IV-E Adoption Assistance – Title IV-E Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302; 31 CFR 205.33; State Administrative and Accounting Manual (SAAM) Section 50.40.80 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and other assets related to the Federally-funded activities. The Department must minimize the time between the drawdown of Federal funds and the disbursement of these funds for Federal program purposes. The timing and amount of fund transfers must be as close as administratively feasible to the Department’s actual cash outlay for program costs. Section 50.40.80 of the SAAM has defined administratively feasible as no more than 7 business days. Condition: The Office of Child and Family Services administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State. The programs are designed to help states provide safe and stable out-of-home care for children under its jurisdiction until the children are returned home safely, placed with adoptive families, or placed in other planned arrangements for permanency. The Department of Health and Human Services’ Service Center (DHHS SC) is responsible for the drawdown of Federal funds and grant accounting and reporting for the Foster Care and Adoption Assistance programs. Though DHHS SC monitors compliance with Federal cash management requirements by utilizing a cash on hand analysis, the analysis combines the following Title IV-E programs: • Foster Care • Adoption Assistance • Title IV-E Prevention Program • Guardianship Assistance As a result, Department procedures do not ensure that each individual program is in compliance with Federal cash management requirements. The Office of the State Auditor performed individual analyses for the Foster Care and Adoption Assistance programs and determined that both programs complied with cash management requirements for fiscal year 2025. Context: In fiscal year 2025, there were: • 52 Federal grant drawdowns totaling $21.5 million for the Foster Care program. • 50 Federal grant drawdowns totaling approximately $35 million for the Adoption Assistance program. Cause: • Lack of adequate procedures to ensure that the cash balance for each Title IV-E program is considered separately before requesting Federal funds • Lack of supervisory oversight Effect: Department policies and procedures would not identify noncompliance with cash management requirements, which could result in: • the Federal government imposing more stringent program-specific cash management requirements based on noncompliance. • the State incurring an interest liability on excess Federal cash balances. • noncompliance with Federal regulations. Recommendation: We recommend that the Department enhance existing procedures and increase oversight to ensure that Federal program cash balances are tracked by program in accordance with Federal requirements. Corrective Action Plan: See F-29 Management’s Response: The Departments agree with this finding. The DHHS Financial Service Center will update existing procedures and increase oversight to ensure that Federal program cash balances are tracked by program in accordance with Federal requirements by 3/31/2026. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 25-1109-01)
(2025-060) Title: Internal control over the Adoption Assistance – Title IV-E eligibility and benefit determination process needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Adoption Assistance – Title IV-E Assistance Listing Number: 93.659 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $1,645 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during fiscal year 2025 and identified known questioned costs for 1 client based on various eligibility attributes. Since each exception is unique to the client, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 1356.40 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The State is allowed to pay a portion of the Federal Adoption Assistance maintenance payments and claim Federal financial participation for Title IV-E eligible clients. Condition: The Adoption Assistance – Title IV-E (Adoption Assistance) program provides Federal funds to states to facilitate the timely placement of children, whose special needs or circumstances would otherwise make them difficult to place, with adoptive families. Funds are available for a one-time payment to assist with the costs of adopting a child as well as for subsidies to adoptive families to assist with the care of the eligible child on an ongoing basis. The Office of Child and Family Services (OCFS) administers the Adoption Assistance program for the State. OCFS financial resource specialists (FRS) are responsible for determining program eligibility and initiating benefits. The FRS uses the Adoption Assistance Checklist to ensure that program eligibility factors, required supporting information, and final determination for Federal Adoption Assistance benefits are obtained and documented. Once the client is determined eligible in the child welfare information system, a daily rate is negotiated by OCFS and the adoptive parents at a rate that does not exceed what the client would qualify for under the Foster Care – Title IV-E program. OSA tested 60 client benefit payments and identified that: • 1 adoptive parent continued to receive Adoption Assistance maintenance payments after OCFS was informed that the client moved out of the home. In addition, the client’s clothing allowance payment was erroneously sent to the individual they were living with at the time of issuance instead of the adoption placement. The client received a daily Adoption Assistance rate of $26.25, resulting in questioned costs of $1,645 during fiscal year 2025. • 1 client, who was eligible for Adoption Assistance, erroneously received a State-funded Foster Care childcare payment while also receiving Federally-funded Adoption Assistance childcare payments during fiscal year 2025. • 1 client, who was eligible for Adoption Assistance, erroneously received 2 weeks of State-funded Foster Care maintenance payments while also receiving Federally-funded Adoption Assistance maintenance payments during fiscal year 2025. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the State provided approximately 4,500 Adoption Assistance clients with $25.5 million in Federal benefits. Cause: • Lack of adequate policies and procedures over verification and accuracy of benefit determinations and associated Adoption Assistance payments • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal and State regulations Recommendation: We recommend that the Department enhance policies and procedures and increase oversight to ensure the accuracy of eligibility and benefit determinations, and verify that benefit payments are made in accordance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. The Department will develop training information for distribution to child welfare staff defining steps for them to take when they discover that a child in an adoption assistance agreement is no longer receiving support from the adoptive parents. These steps will raise the information to the OCFS Adoption Unit Manager's attention so they can take appropriate actions. Contact: Denise Merrill, Manager of Child Welfare Statewide Programs, DHHS, 207-822-2255 (State Number: 25-1110-01)
(2025-061) Title: Internal control over Medicaid Nursing Facility audits needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Division of Audit Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 42 CFR 447.253(g); MaineCare Benefits Manual, Chapter III, Section 67 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to provide for the periodic audits of the financial and statistical records of participating providers. The MaineCare Benefits Manual (MCBM) Chapter III, Section 67 outlines the documentation and support required to be included in a provider’s annual cost report filing submission to the Division of Audit. The Division of Audit’s requirements for reviewing the cost reports and performing uniform desk reviews is also outlined. Section 67 states that the Division of Audit must perform a uniform desk review on each Nursing Facility (NF) cost report submission within 365 days of receipt of an acceptable cost report filing. Condition: For each participating Long Term Care Facility, the Department must provide for the filing of uniform cost reports in order to establish payment rates and must provide for the periodic audits of financial and statistical records. The specific audit requirements will be established by the State plan. The MCBM states uniform desk reviews shall be completed within 365 days after receipt of an acceptable cost report filing, including financial statements and other information requested from the provider, except in unusual situations including, but not limited to, delays in obtaining necessary information from a provider. Unless the Division of Audit intends to schedule an on-site audit or an unusual situation referenced above exists, a written summary report of findings and adjustments shall be issued upon completion of the uniform desk review. The Division of Audit did not complete NF audits in accordance with Federal regulations. The population of NF uniform desk reviews due for completion in fiscal year 2025 was 88. Of those 88 uniform desk reviews, none were completed at the time of audit testing in October 2025. Context: During fiscal year 2025, the Department: • provided $270.4 million in Federal Medicaid funding and $112.0 million in State Medicaid funding to NFs. • completed 61 NF uniform desk reviews related to prior fiscal years. Cause: Lack of resources Effect: • Noncompliance with Federal and State regulations • The determination of amounts owed to or from NFs is delayed. Recommendation: We recommend that the Department reallocate resources to address the backlog of NF uniform desk reviews. Timely audit issuance will minimize the impact on providers of potential payables and receivables. Corrective Action Plan: See F-30 Management’s Response: The Department agrees with this finding. Progress toward compliance is taking longer than expected due to continued difficulty in hiring staff and the completion of COVID related audit work. The COVID audit work is still hindering the audit process. However, recent changes to the Nursing Facility reimbursement methodology, effective January 1, 2025, reduce the amount of testing required in these audits. Contact: Herb Downs, Director, Division of Audit, DHHS, 207-287-2403 (State Number: 25-1106-01)
(2025-065) Title: Internal control over Medicaid procurement needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Office of State Procurement Services Division of Contract Management Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.317; 5 MRSA 1825-B and D; Office of State Procurement Services (OSPS) policies The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must follow the same policies and procedures it uses for procurements with non-Federal funds. Awards shall be made to the best-value bidder, taking into consideration the best interest of the State. The requirement to competitively bid a contract may be waived if specific criteria is met, including the item or service can only be procured from one source or it is an emergency procurement. Each bid, with the name of the bidder, must be entered on record. Each record, with the successful bid indicated, must be open to public inspection after the letting of the contract. The Department must justify the selection of vendor, either through competitive or noncompetitive process, and provide a detailed explanation of cost, demonstrating how the best value for the State is ensured. The Chief Procurement Officer shall make the public aware of contracts and grants for which bids are being requested and communicate the procedure used in reviewing bids. Contracts must be submitted to OSPS at least 14 days prior to the contract start date. A Notice of Intent to Waive the Competitive Bidding Process (NOI) must be posted to the OSPS website for 7 calendar days prior to the start of a noncompetitively bid contract. Condition: The Medicaid program is administered by the Office of MaineCare Services (OMS). OSPS is the central oversight agency for all State procurement. The Department of Health and Human Services (DHHS) Division of Contract Management (DCM) oversees the solicitation and contract implementation for all DHHS procurement. DCM coordinates with DHHS program personnel to evaluate and select vendors and subrecipients, determine contract terms, and provide required documentation to OSPS. OSPS is responsible for reviewing and approving Procurement Justification Forms (PJFs) submitted by DCM on behalf of program personnel prior to the award of contracts. The PJF represents program personnel’s assertion that the selected procurement method is appropriate under applicable State and Federal requirements, and that required evaluation procedures have been performed. OSPS must publicly post a NOI for all procurements over $10,000 entered into without a competitive process for a minimum of 7 calendar days prior to the start of the contract. The NOI includes the signed PJF provided to OSPS by DCM. The Office of the State Auditor (OSA) tested 26 contracts, 6 procured competitively and 20 procured noncompetitively, that accounted for $42.8 million of the $91.3 million in Medicaid procurement-related transactions in fiscal year 2025 and found: • PJFs were reviewed for reasonableness by DCM and OSPS, but DHHS could not provide documentation to support the assertions made by OMS were accurate. • For 18 contracts, DCM provided the PJF to OSPS for their review after the contract had commenced, between 5 and 152 days after the contract start date. For 18 contracts, OSPS approved the PJF after the contract commenced, between 7 and 182 days after the contract start date. For 2 contracts, documentary evidence of PJF approval by OSPS could not be provided. • For 9 noncompetitive contracts, OSPS posted the NOI after contract performance had commenced, between 7 and 169 days after the contract start date. For 7 of these contracts, services had been initiated and financial obligations incurred prior to the NOI. OSA utilized a risk-based approach to select 6 contracts issued by OMS and a non-statistical random sample of all other contracts. Context: In fiscal year 2025, the Department expended $91.3 million in procurement-related transactions from Medicaid funds of $3.4 billion. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and future disallowances • Noncompliance with Federal and State procurement requirements, including NOI posting requirements, could result in the need to void a contract or exposure to legal proceedings. Recommendation: We recommend that OSPS: • increase agency awareness of the procedures related to the timing of procurement contract documentation being submitted to OSPS for review prior to the contract start date; and • finalize and implement an updated procurement policy and procedure manual that identifies the parties responsible for key aspects of the procurement process. We also recommend that DCM and OMS develop policies and procedures and increase oversight to ensure all procurement transactions comply with Federal and State requirements, including: • DCM obtaining and reviewing documentation to support the assertions made by OMS for accuracy and reasonableness; and • ensuring PJFs are completed, reviewed, and submitted to OSPS prior to the contract start date. Corrective Action Plan: See F-32 Management’s Response: DAFS Response: The Department agrees with this finding. OSPS does not authorize, encourage, or approve agencies allowing vendors to perform work at risk. However, OSPS also does not delay review and approval solely due to contract start-date issues, as doing so would increase the State’s risk exposure, potentially disrupt federally required programs, and hinder agencies’ compliance with federal period-of-performance requirements. To address these concerns, OSPS will formalize and issue policy guidance that clearly defines agency and OSPS roles and responsibilities in the contracting process. This guidance will expand the agency-focused section to emphasize timely submission and processing, along with the risks and implications associated with contracting delays. In advance of fiscal year-end, OSPS will issue a separate policy document and companion guidance as a spotlight topic in the monthly newsletter and posted to the intranet for agency reference. DAFS Contact: David Morris, Acting Chief Procurement Officer, OSPS, 207-624-7335 DHHS Response: The Department partially agrees with this finding. There is not a requirement to provide documentation that the Department personnel’s assertions are accurate regarding Department personnel’s review of PJFs. The Department agrees that it can improve the timing of procurement documents in relation to the start dates of the contracts. Extenuating circumstances exist periodically that prevent the timeliness of these documents. In some cases, there are delays in the grant approval at the Federal level. Delays in Legislative approval of budgets can also lead to procurement documentation delays. DHHS Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Absent adequate documentation to support the veracity of the assertions made on the PJF by program personnel, the best value for the State cannot be ensured. The finding remains as stated. (State Number: 25-1106-06)
(2025-062) Title: Internal control over Medicaid drug rebates needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; Section 1927 of the Social Security Act (42 USC 1396r-8) The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Section 1927 of the Social Security Act requires manufacturers that wish to have their outpatient drugs covered by Medicaid to enter into an agreement with the Centers for Medicare & Medicaid Services (CMS), under which the manufacturers agree to pay rebates for drugs dispensed and paid for by the State Medicaid agencies under the State plan. Drug rebates are shared between the State and Federal government. Condition: Drug manufacturers are required to submit a list of all covered outpatient drugs, along with each drug’s average manufacturer price and “best price” to CMS. Utilizing this information, CMS calculates a unit rebate amount (URA) for each covered outpatient drug and provides the amounts to the State on a quarterly basis. The Department is required to maintain drug utilization data that identifies, by National Drug Code (NDC), the number of units of each covered outpatient drug for which the Department has paid pharmacy providers. The utilization data is provided to CMS and the manufacturers. The number of dispensed units is applied to the URA to determine the rebate amount due from each manufacturer. The State contracts with a vendor to calculate the drug rebate amounts and invoice manufacturers for drug rebates. The Office of the State Auditor (OSA) identified that the Department does not have adequate procedures in place to ensure the accuracy and completeness of the drug rebate amounts invoiced by the vendor. Audit procedures identified that: • prior to issuing invoices, the Department reviews a sample of 10 invoices to ensure the drugs are rebatable and accurately calculated; however, the invoices are judgmentally selected and not based on risk. • though the Department reviews invoiced drug rebates for reasonableness, this review is performed at a summary level and after the invoicing cycle. Context: In fiscal year 2025, the State invoiced approximately $300 million for rebatable drugs. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Inaccurate or incomplete invoicing of drug rebates would result in overpayments or underpayments to the State and Federal government. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement procedures to confirm the drug rebate amounts calculated and invoiced by the vendor are accurate and complete. These procedures should occur prior to issuing invoices and provide adequate coverage of the drug rebates invoiced, including: • validating that only rebatable drugs are invoiced; • verifying that all rebatable drugs are included for invoicing; • comparing drug utilization data to the number of dispensed units invoiced; and • corroborating the correct URA is applied to each NDC. This will ensure that correct drug rebate amounts are returned to the State and Federal government. Corrective Action Plan: See F-30 Management’s Response: The Department disagrees with this finding. Drug Rebate pre-invoicing and post-invoicing is completed quarterly. As demonstrated during walkthroughs and during our meetings Maine completes specific tasks to ensure accuracy of the invoicing process. The pre-invoicing and post-invoicing procedures are documented in the Pharmacy Rebate Information Management System (PRIMS) Desk Level Procedure (DLP). The pre-invoicing work is performed by the State that compares drug utilization data to the number of dispensed units invoiced. Upon the completion of the pre-invoicing review approval is provided to the vendor allowing them to continue with the invoicing process. There is no requirement on how we select our sample of invoices to review. Based on OSA noting no exceptions to the drug rebate amounts, our system in place to review invoiced drug rebates is functioning as intended. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 Auditor’s Concluding Remarks: The procedures mentioned in Management’s Response only address whether the drug rebate information presented by the vendor for invoicing by the Department is reasonable. The Department’s procedures do not independently substantiate that all rebatable drugs are included for invoicing. Furthermore, the existing invoice review procedures address only a limited number of invoices and dispensed units, are performed at a summary level and do not consider risk factors. As a result, the Department does not have adequate assurance that all rebatable drugs are invoiced accurately and completely. The finding remains as stated. (State Number: 25-1106-05)
(2025-063) Title: Internal control over Medicaid SEFA reporting needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Health and Human Services Service Center Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.510 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended. At a minimum, the SEFA must include the total amount provided to subrecipients from each Federal program. Condition: The Department of Health and Human Services’ Service Center must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Office of the State Auditor reviewed amounts reported on the SEFA and identified $11.8 million of Federal expenditures incorrectly reported as amounts provided to subrecipients that should have been reported as direct expenditures. OSC subsequently corrected the SEFA. Context: In fiscal year 2025, Federal Medicaid expenditures totaled $3.4 billion. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Inaccurate reporting of expenditure amounts on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department implement policies and procedures to ensure expenditures are appropriately classified and reported on the SEFA. Corrective Action Plan: See F-31 Management’s Response: The DHHS and the DHHS Financial Service Center agree with this finding. The DHHS Financial Service Center will update policies and procedures to ensure expenditures are appropriately classified and reported on the SEFA by February 2026. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 25-1106-03)
(2025-064) Title: Internal control over Medicaid utilization control needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 42 CFR 456.3 and .23 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Utilization control requirements are applicable to all services provided under a State plan. The State Medicaid Agency (SMA) must implement a statewide surveillance and utilization control program that provides for the oversight and monitoring of all services provided under the State plan, including procedures for ongoing post-payment review of all Medicaid services. The post-payment review must identify exceptions so that the SMA can correct misutilization practices of beneficiaries and providers on a timely basis. Condition: The Department’s Office of MaineCare Services’ Program Integrity Unit (PIU) is responsible for implementing and monitoring the State’s Medicaid utilization control (UC) program. A Medicaid UC program is a State-mandated, Federally-required system that monitors and manages the appropriateness, quality, and necessity of all medical services, and includes a sampling plan and post-payment review process designed to provide an ongoing evaluation of Medicaid beneficiaries and providers. PIU’s UC program includes a monthly sampling plan that relies on various data analytics. The results of the data analytics are reviewed to determine the extent of beneficiary or provider post-payment reviews. The Office of the State Auditor (OSA) reviewed PIU’s policies and procedures, the monthly sampling plan, and a selection of post-payment review files, and performed data analytics to determine the appropriateness of the design and implementation of the UC program. PIU could not provide documentation of the methodology used to identify projects and post-payment reviews performed in relation to surveillance of all Medicaid services provided under the State plan. Additionally, a sampling plan relying on data analytics as a source of post-payment review limits the scope of the UC program to only what can be identified through data anomalies. PIU’s sampling plan does not document consideration of misutilization practices of beneficiaries or providers. As a result, OSA could not determine the completeness of the UC program. Context: In fiscal year 2025, the State paid $3.2 billion to approximately 10,600 providers, including $2.5 billion in Federal funds. Cause: Lack of adequate policies and procedures Effect: PIU’s UC program may not provide adequate monitoring of all Medicaid services, resulting in potential noncompliance with Federal regulations. Recommendation: We recommend that the Department document policies and procedures to ensure that PIU’s UC program is designed to provide ongoing monitoring and evaluation of all Medicaid services provided under the State plan, and that documentation to support the extent of such monitoring is properly maintained. Corrective Action Plan: See F-31 Management’s Response: The Department disagrees with this finding. This finding represents a misunderstanding of the applicable federal regulations and the state entity responsible for compliance. A Utilization Control (UC) program is the responsibility of the State Medicaid Agency as a whole, not the Program Integrity Unit (PIU). Additionally, there are many more federal regulations governing UC programs than cited by the Office of State Auditor (OSA) in the finding and touch on a host of controls that were not reviewed or considered in this audit. Moreover, the OSA appears to be basing findings on interpretations that are unsupported by the regulatory text cited. Second, the OSA confuses PIU's annual review plan (a yearly plan of focused program integrity areas of focus and review) with an agency-wide UC program: these are not the same, nor are they required to be. The Department's current processes for PIU's annual review plan were implemented in response to OSA findings in 2015 relating to an OSA finding that the Department was not fully utilizing available data analytics. In the intervening years, the OSA has not found Program Integrity's annual review plan, or the process of developing the plan, to be deficient. There has been no change in the Department's process or the regulation to justify the OSA's newly found position here. The OSA's criticism of PIU's use of data analytics contradicts a prior OSA findings on data analytics use, is contrary to accepted Department adjustments made in response, and represents a significant departure from federal guidance and industry standards around best practices for leveraging data analytics to prevent and detect improper payments and/or utilization. The PIU's annual review plan supplements post-payment reviews that PIU conducts based upon complaints and referrals. Finally, this finding’s singular focus on PIU's annual review plan fails to account for a myriad of other systems and processes the Department has in place to monitor utilization, including, but not limited to: 1. A contracted vendor (HMS) performing post-payment reviews of hospitals, nursing facilities, and other long-term care facilities; 2. MaineCare's Case Mix unit - performing look back reviews of documentation and services in nursing facilities and other long-term care units; 3. A contracted vendor (Acentra) reviewing authorization requests for behavioral health services and continuing stay reviews of services at designated intervals; 4. A contracted vendor (Maximus) that performs assessments and authorizations for nursing and personal care services; 5. A contracted vendor (Optum) that performs prior authorization reviews for pharmacy services and produces a variety of reports on drug utilization; 6. Fiscal intermediaries performing oversight and administrative support for self-directed services; 7. State staff who review and approve plans of care for Home and Community Based Waiver Services and conduct quality reviews of providers; 8. State staff performing quality assurance reviews of providers of mental and behavioral health services; 9. State staff monitoring and addressing inappropriate emergency department usage by beneficiaries; and 10. State staff with oversight and performing qualitative and quantitative reviews of a variety of programs operated under delivery service reform, including: Accountable Communities, Behavioral Health Homes, Certified Community Behavioral Health Clinics, Community Care Teams, MaineMOM, Opioid Health Homes, and Primary Care Plus. 11. State and contracted vendor (Gainwell) staff reviewing medical necessity and other allowability for medical services requiring prior authorization for initial requests and renewals. 12. A CMS-compliant Electronic Visit Verification (EVV) system, in accordance with Section 12006 of the 21st Century Cures Act, that ensures payment for applicable services is tied to an EVV record demonstrating that the service occurred; data from the system also contributes to post-payment reviews for applicable services. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 Auditor’s Concluding Remarks: PIU’s Policy and Procedure Handbook identifies PIU as the office responsible for ensuring the Medicaid program is in compliance with 42 CFR 456.3 and .23; these Federal requirements reference procedures that directly correlate to the data analysis and post-payment review processes performed by PIU. In response to the Department’s criticism of OSA’s approach, OSA develops an audit plan annually, independent of prior year audit procedures or results, in response to risks affecting each audit. In fiscal year 2025, OSA’s procedures performed over UC requirements were tailored in response to identified risks and should not be designed to support audit results from prior years; those procedures identified a population of Medicaid providers that PIU could not provide documentation to support monitoring had been performed. These providers and services do not appear to be included in the “other systems and processes” listed in Management’s Response. The finding remains as stated. (State Number: 25-1106-04)
(2025-069) Title: Internal control over DG – PA program special reporting needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Defense, Veterans and Emergency Management State Bureau: Maine Emergency Management Agency Federal Agency: U.S. Department of Homeland Security Assistance Listing Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Assistance Listing Number: 97.036 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 170 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Agencies must report each subaward that equals or exceeds the first-tier subaward threshold of $30,000 in Federal funds in the public-facing Federal Funding Accountability and Transparency Act (FFATA) System for Award Management (SAM). Condition: When an amount exceeding the first-tier subaward threshold is awarded to a subrecipient of the Disaster Grants – Public Assistance (DG – PA) program, Maine Emergency Management Agency (MEMA) must collect and enter data into SAM. The Office of the State Auditor (OSA) tested 60 DG – PA program subawards totaling $16,759,534 that exceeded the first-tier subaward threshold. Federal regulations require the following information for identified noncompliance to be included in FFATA findings: • 11 subawards totaling $4,106,246 were not reported; • 60 subawards totaling $16,759,534 were not reported timely; • 10 subaward amounts were reported incorrectly; and • 49 subawards reported incorrect key data elements. OSA selected a non-statistical random sample. Context: In fiscal year 2025, MEMA was required to report 574 first-tier subawards totaling $135.6 million under the DG – PA program. First-tier subawards account for 84 percent of the program’s fiscal year 2025 expenditures. Cause: Lack of resources Effect: • Noncompliance with Federal regulations • Accurate first-tier subaward information for the DG – PA program was not reported to the Federal government timely and included inaccurate or incomplete information. This information may be used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department allocate resources to ensure that first-tier subawards are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-34 Management’s Response: The Department agrees with this finding. Corrective action was implemented beginning in November of 2025. Untimely or missing reports were primarily due to staff turnover in the agency, which has been remedied by successful recruitment efforts. Incorrect data elements were attributed to an ineffective element of the prior reporting process, which increased the reporting burden by tasking staff with creating ad-hoc unique identifiers rather than using existing unique identifiers. In the monthly reporting process since November 2025, federally assigned project numbers are used to distinctly identify each subaward, and reporting personnel retrieve obligation reports directly from the relevant federal system, minimizing the overall staff burden in reporting. Contact: Sunny Cyr, MEMA Business Office Director, DVEM, 207-707-2507 (State Number: 25-1502-03)
(2025-070) Title: Internal control over DG – PA program financial reporting needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Defense, Veterans and Emergency Management State Bureau: Maine Emergency Management Agency Federal Agency: U.S. Department of Homeland Security Assistance Listing Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Assistance Listing Number: 97.036 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with reporting requirements. Condition: The Maine Emergency Management Agency (MEMA) administers the Disaster Grants – Public Assistance (DG – PA) program for the State. MEMA is required to submit quarterly DG – PA program Federal Financial Reports (FFRs) to the Federal Emergency Management Agency (FEMA) Regional Office. FFRs provide FEMA with the status of funds for the award, Federal expenditures, and cost-sharing requirements. The Office of the State Auditor (OSA) tested 7 FFRs due in fiscal year 2025 and found deficiencies in 6, as follows: • 1 FFR inaccurately reported total Federal funds authorized as $442,026,321 when the correct total was $442,015,638, and the recipient share of expenditures as $19,499,834 when the correct share was $7,338,371; • 1 FFR inaccurately reported total Federal funds authorized as $16,582,190 when the correct total was $16,560,302, and the recipient share of expenditures as $13,249,493 when the correct share was $5,367,072; • 1 FFR inaccurately reported total Federal funds authorized as $17,805,320 when the correct total was $17,142,335; • 1 FFR inaccurately reported the recipient share of expenditures as $13,077,332 when the correct share was $13,081,295; • 1 FFR inaccurately reported the recipient share of expenditures as $4,698,599 when the correct share was $3,893,046; and • 1 FFR inaccurately reported the recipient share of expenditures as $778,776 when the correct share was $199,157. OSA selected a non-statistical random sample. Context: During fiscal year 2025, 45 FFRs were required to be filed by MEMA for the DG – PA program. Cause: • Lack of adequate policies and procedures to ensure data used for financial reporting is complete and accurate • Lack of supervisory oversight Effect: • Noncompliance with Federal reporting requirements • Inaccurate tracking of subawards may result in noncompliance with Federal matching requirements. Recommendation: We recommend that MEMA enhance policies and procedures to ensure that FFRs are accurate and include all required information for compliance with Federal reporting requirements. Corrective Action Plan: See F-34 Management’s Response: The Department agrees with this finding. The Department will publish and implement a revised Federal Financial Reporting procedure to fully preserve reporting/validation source material and clearly document the justification for any variances from the source material. Contact: Sunny Cyr, MEMA Business Office Director, DVEM, 207-707-2507 (State Number: 25-1502-04)
(2025-071) Title: Internal control over DG – PA program subrecipient audit procedures needs improvement Prior Year Findings: None State Department: Defense, Veterans and Emergency Management State Bureau: Maine Emergency Management Agency Federal Agency: U.S. Department of Homeland Security Assistance Listing Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Assistance Listing Number: 97.036 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 2 CFR 200.521 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must follow up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Department must issue a management decision for audit findings that relate to Federal awards provided to the subrecipient within 6 months of acceptance of the audit report by the Federal Audit Clearinghouse (FAC). Condition: The Maine Emergency Management Agency (MEMA) administers the Disaster Grants – Public Assistance (DG – PA) program for the State. MEMA is required to verify and document that Single Audits have been completed in the FAC and issue a management decision for audit findings related to awards to subrecipients. The Office of the State Auditor (OSA) tested 4 DG – PA program subrecipients subject to Single Audit requirements and found that documentation of review for 2 subrecipients could not be provided. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the Department expended $160.5 million in DG – PA program funds, of which $154.6 million was provided to 27 subrecipients. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Noncompliance with Federal regulations • Subrecipients not complying with Federal statutes, regulations, or the terms and conditions of subawards may not be implementing appropriate corrective action in response to audit findings. Recommendation: We recommend that the Department enhance policies and procedures to ensure that adequate documentation is maintained and that subrecipient audits are received, reviewed, and appropriate action is taken in response to audit findings. Corrective Action Plan: See F-34 Management’s Response: The Department agrees with this finding. The Department will publish and implement an updated subrecipient monitoring procedure to require more extensive and narrative documentation of the single audit review process, including: - a list of subrecipients required to file a single audit report for a given audit year - whether or not an audit had been filed as of the review date - analysis of audit findings as relevant - summary of required actions per the subrecipient monitoring procedure, and/or updates on actions/communications since the prior review period as relevant Contact: Sunny Cyr, MEMA Business Office Director, DVEM, 207-707-2507 (State Number: 25-1502-05)
Finding Reference 2025-006 Federal Agency: U.S. Department of Health and Human Services Federal Program Title and ALN: Child Care and Development Block Grant (CCDF Cluster) (ALN 93.575) Compliance Requirement: Reporting – Financial Reporting (L) (MW) Type of finding: Material Weakness in Internal Control (MW), Instance of Noncompliance (NC) Statement of Condition During our audit procedures, we noted that the Program did not maintain an adequate set of accounting records that present the financial position and results of its operations of the program. In addition, required financial reports were not submitted within the established reporting deadlines. CriteriaTitle 2 U.S. Code of Federal Regulations (CFR) 200.328 and 200.329 require subrecipients to submit accurate, complete, and timely performance and financial reports in accordance with the terms and conditions of the Federal award. Additionally, 2 CFR 200.303 requires non-Federal entities to establish and maintain effective internal control over Federal programs to provide reasonable assurance that Federal awards are managed in compliance with Federal statutes, regulations, and the terms and conditions of the award. Additionally, the subaward agreement and reporting guidelines issued by the pass-through entity (ACUDEN) also establish specific reporting deadlines and require that reported financial information be supported by the subrecipient’s accounting records. Cause of Condition The program staff faced performance challenges due to a lack of staff which caused the accounting records to be delayed. Effect of Condition As a result of the inadequate maintenance of accounting records and untimely preparation of financial reports, the Municipality failed to submit the required report within the 30 calendar days required by the regulation, which leads to the noncompliance of the reporting requirement. Recommendation We recommend that management strengthen internal controls over financial reporting by: • Ensuring accounting records are maintained current and reconciled on a monthly basis; • Establishing formal written reporting procedures with clear timelines; • Assigning personnel responsible for report preparation and review; and • Implementing supervisory review procedures to verify that reports agree with underlying accounting records prior to submission. Questioned Costs None Prior-Year Finding This is a new finding. View of Responsible Official and Planned Corrective Action Plan The Municipality agrees with the finding and stated that it will implement corrective actions to improve compliance with reporting requirements. Management plans to formalize reporting procedures, assign responsible personnel, and require reconciliations between reported amounts and accounting records prior to submission of reports to ACUDEN, along with enhanced supervisory review. Implementation Date: July 1, 2026 Responsible Person: Mr. Luis A. Velez Rivera, Finance Director
FEDERAL PROGRAM (ALN 93.356) HEAD START DISASTER RECOVERY FROM HURRICANES HARVEY, IRMA, AND MARIA U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 02td000223 (Federal Award Year June 1, 2021 – December 31, 2025) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY CRITERIA 2 CFR Section 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. In addition, 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures for evaluating internal controls and compliance with reporting requirements, we selected three (3) reports that were submitted during our fiscal year audit. During our review of the data related to Grant Award 02TD000223, we noted the following deficiency: the total Federal expenditure reported on line (e) of the report does not match the data provided by the client in the database, with a difference of $250,000. QUESTIONED COSTS None PERSPECTIVE INFORMATION This deficiency represents a systemic issue attributable to inadequate review procedures, which has resulted in the inaccurate reporting of Federal expenditures. STATEMENT OF CAUSE The discrepancy may be due to an error in the data collection process or a failure to properly transfer data between the database and the Federal expenditure report, or a lack of proper reconciliation between the two. POSSIBLE ASSERTED EFFECT This discrepancy could affect the accuracy of the financial reports, compromising transparency and the Municipality's compliance with Federal reporting requirements. It could also lead to misunderstandings regarding the proper use of the Federal funds awarded. IDENTIFICATION OF REPEAT FINDING This is not a repeat finding. RECOMMENDATIONS We recommend that the Municipality reviews their processes for reporting and recording Federal expenditure to ensure that the data reported on the system matches the database used during the audit. Additionally, we suggest implementing a regular reconciliation process between the reporting system and the database to prevent future errors and ensure compliance with Federal reporting requirements.
Equipment Property Management Federal Program: Congressional Directives (ALN 93.493) Federal Agency: Department of Health and Human Services Federal Award Number: 1CE1HS52890-01-00 Federal Award Year: September 30, 2023 through June 30, 2026 Criteria or Requirement Per 2 CFR section 200.313, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. Per 2 CFR 200.303, a non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition and Context For 2 out of 9 purchase transactions, equipment exceeding the capitalization threshold per 2 CFR section 200.1 was not capitalized. Therefore, a property record did not exist for federally funded equipment purchased in the amount of $937,768. The total program expenditures were $2,112,657 for which $1,640,656 were capital equipment purchases and $472,001 were non-capital purchases. Further, $67,919 of the $702,888 that was capitalized, the property record did not properly identify the asset’s federal award program. Cause and Potential Effect The University's internal controls for determining and documenting whether an equipment acquisition was a capital asset for which a property record should be created in the system with the required information was not operating effectively. Accordingly, the University acquired federally funded equipment, and a property record was not created. Questioned Cost There were no questioned costs associated with the finding. Statistically Valid Sample The sample was not intended to be, and was not, a statistically valid sample. Identification of Whether the Audit Finding is a Repeat of a Finding in the Immediately Prior Audit Yes – prior year finding 2024-003. Recommendation We recommend the University enhances the precision of the controls over equipment purchases to ensure that a property record is created within the system containing the required information, inclusive of the federal award, for all federally funded equipment. View of Responsible Officials Management of the University takes no exception to this reported finding. We have implemented the remedial actions as outlined in our Corrective Action Plan.
Finding: 2025-002: Significant Deficiency in Internal Control Over Compliance and Non-Material Noncompliance Federal Awarding Agency: Department of Housing and Urban Development (HUD) State Awarding Agency: Not applicable (Direct Award) Program Name: Housing Voucher Cluster ALN: 14.871 and 14.879 Compliance Requirement: Special Test-Housing Quality Standards (HQS) Inspection and Enforcement Prior Year Finding Number: 2024-003 Criteria: Per 24 CFR 982.404 “The public housing authority (“PHA”) must not make any housing assistance payments (HAP) for a dwelling unit that fails to meet the HQS, unless the owner corrects the defect within the period specified by the PHA and the PHA verifies the correction. If a defect is life threatening, the owner must correct the defect within no more than 24 hours. For other defects, the owner must correct the defect within no more than 30 calendar days (or any PHA-approved extension).” Per 2 CFR Section 200.303, non-Federal entities receiving federal awards must establish and maintain internal control designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Per 24 CFR 982.405, “The PHA must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets the Housing Quality Standards (HQS).” Condition: During our testing of sixty (60) inspections, we noted three (3) instances where a unit was notinspected on the required biennial basis. Additionally, we noted that the County failed to maintain appropriate logs or records of failed HQS inspectionsduring the year. However, during our testing of the six (6) units that failed HQS, the County appropriatelydocumented the enforcement of the HQS, properly notified the unit owners of the reported deficiencies, andperformed timely follow-up inspections. Cause: The County does not appear to have adequate policies and procedures in place to ensure inspections are performed on a timely basis. The County converted to a new HQS tracking system during current fiscal year which caused challenges with maintaining appropriate logs or records of failed HQS inspections. Effect: The County’s control environment over HQS enforcements did not ensure inspections were timely performed. As a result, the County was not in compliance with the HQS enforcement requirements as of June 30, 2025. Non-compliance with these requirements creates a risk that the County may provide federal funds to tenants of ineligible units. Recommendation: The recommendation is for the County to review their client management software system’s functionality to determine whether an electronic process for scheduling and follow-up or comprehensive reporting can be identified to improve efficiency and eliminate the potential for human error. If an electronic process or comprehensive reporting is not available, or cannot fully cover the deficiency, the recommendation is for the County to identify measures that streamline their current process and to eliminate non-compliance. Potential examples include having the Housing Choice Voucher (HCV) Program Manager review and schedule upcoming inspections in advance, checking in with the Inspector on a monthly basis to review inspections that are due and inspections that are scheduled, and having the HCV Program Manager ensure that each scheduled inspection is documented timely in the system. Questioned costs: None. Context: This is a condition based on testing of the County’s compliance with specified requirements. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Views of Responsible Officials: The County concurs with the auditor’s finding and recommendation.
Condition: For FAL 10.185, all 40 vendor disbursements tested lacked evidence of supervisory approval, as the payment request forms were not signed by the designated approver prior to payment. For FAL 10.558, 27 of thirty-two vendor disbursements tested lacked documented supervisory approval prior to payment. Finally for FAL 84.010A, two of the ten vendor disbursements tested lacked documented supervisory approval prior to payment. In each noted instance, payments were processed without evidence that the School performed and documented a review in accordance with established internal control procedures. Criteria: According to 2 CFR §200.303, Internal Controls, non-Federal entities must establish and maintain effective internal control over federal awards that provides reasonable assurance the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Further, under 2 CFR §§200.403, Factors Affecting Allowability of Costs, and 200.405, Allocable Costs, costs charged to federal awards must be necessary, reasonable, allocable, and conform to any limitations or exclusions set forth in federal regulations or award terms. Cause: The School did not consistently enforce established approval procedures, and monitoring controls were not operating effectively to ensure payment request forms were reviewed and signed prior to disbursement. Effect: Failure to document supervisory approval increases the risk that unallowable, inaccurate, or unsupported expenditures could be processed and charged to federal programs without detection. Recommendation: We recommend that the School enforce existing policies requiring documented supervisory approval prior to processing payments and implement monitoring procedures to ensure approval documentation is completed and retained. In addition, the School should strengthen pre-payment review procedures to ensure expenditures are evaluated for allowability, necessity, reasonableness, and proper allocation in accordance with 2 CFR Part 200 and applicable program requirements. Training should be provided to personnel responsible for processing and approving federal program expenditures to reinforce compliance responsibilities. Management’s Response: The School’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition: Expenditures for the Child and Adult Care Food Program were incorrectly reported as expenditures to other nutrition programs. Criteria: According to 2 CFR §200.303, Internal Controls, non-Federal entities must establish and maintain effective internal control over federal awards that provides reasonable assurance the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Further, under 2 CFR §§200.400, Policy Guide, and 200.405, Allocable Costs, costs are to be adequately supported as charged to the Federal award and must be necessary, reasonable, allocable, and conform to any limitations or exclusions set forth in federal regulations or award terms. Cause: The School did not understand the need to properly identify expenditures to the appropriate formula grant nutrition program. Effect: Although expenditures were properly reported collectively over all the nutrition programs, expenditures for specific nutrition programs were incorrectly reported for various separately funded nutrition programs. Recommendation: We recommend that the School properly identify and report nutrition program expenditures by program. Management’s Response: The School’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
2025-003: U.S. Department of the Interior Direct and Pass-through Tahoe Resource Conservation District Southern Nevada Public Land Management, 15.235 Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Grant Award Number: Affects all grant awards included under assistance listing 15.235 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 of U.S. Code of Federal Regulation (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) provides that a non-federal entity may charge only allowable costs that are adequately documented and are necessary and reasonable for performance of the federal award under the principles of 2 CFR Part 200, Subpart E. Uniform Guidance section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Expenditures for equipment usage were charged to the grant using an incorrect billing rate and billing rates for burn mix were not originally documented and supported. Cause: North Lake Tahoe Fire Protection District (the District) did not have adequate internal controls to ensure accurate billing rates for equipment charges were used and to ensure that internally generated fees, such as burn mix, were documented to support the amount billed to the grant. Effect: Unallowable costs were charged to the program. Questioned Costs: None reported as known and projected questioned costs were less than $25,000. Context/Sampling: A nonstatistical sample of 60 ($15,434) out of a population of 708 ($112,987) equipment usage expenditures was selected for testing. Two transactions were for burn mix, which was billed at an internally generated rate. The documentation for developing the rate was not originally maintained. However, it was generated during the audit to assist in determining the reasonableness of what was charged. In addition, 11 transactions were for a Chipper Trailer, which were charged to the program at $72.38 per hour of usage rather than the published rate of $72.28 per hour. Repeat Finding from Prior Year: No Recommendation: We recommend the District enhance internal controls to ensure accurate billing rates for equipment charges are used and that charges for internally generated fees, such as burn mix, are documented prior to charging the fees to the program. Views of Responsible Officials: North Lake Tahoe Fire Protection District agrees with this finding.
Finding 2025-002: NSLDS Reporting Federal Agency U.S. Department of Education Federal Program Student Financial Assistance Cluster (ALN # 84.268, 84.063) Federal Award Year July 1, 2024 through June 30, 2025 Federal Award Numbers P063P241963; P268K251963; P268K256998; P268K256953; P268K258670; P268K256952 Criteria or Requirement Per Sections 34 CFR 690.83(b)(2) and 34 CFR 685.309, a school shall update the student status confirmation report for changes in student status, report the date the enrollment status was effective and return the student status confirmation report to the Secretary within 30 days unless it plans to submit an enrollment report within the next 60 days of receipt. Per Sections 4.4.2 through 4.4.4 of the NSLDS enrollment reporting guide, institutions are responsible for accurately reporting all Campus-Level Record data elements and considers certain data elements to be high risk including OPEID Number, Enrollment Effective Date, Enrollment Status, and Certification Date. Per Section 4.4.8 of the NSLDS enrollment reporting guide, institutions are responsible for accurately reporting all Program-Level Record data elements and considers certain data elements to be high risk including OPEID Number, CIP Code, CIP Year, Credential Level, Published Program Length Measurement, Published Program Length, Program Begin Date, Program Enrollment Status, and Program Enrollment Effective Date. Per 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition Found For 22 out of the 520 data elements tested across a sample of 40 students, the data element was not reported accurately. The data elements not reported accurately included the student's enrollment status, OPEID number, program-level effective date, and the published program length. There were no exceptions related to the timeliness of NSLDS reporting identified. • For 1 out of 40 students, the student’s status was inaccurately reported as Withdrawn while studying abroad rather than Full-time at both the Campus-Level Record and the Program-Level Record. • For 8 out of 40 students, the incorrect OPEID Number was reported. • For 2 out of 40 students who had a status change from Withdrawn to Full-time, the effective date of the status change was not reported accurately within the Program-Level Record. The effective date was reported as 7/5/2022 rather than 2/10/2025. • For 7 out of 40 students, the effective date for the Graduated status reported to NSLDS at the Program-Level Record did not match the Campus-Level Record by 1-9 days. • For 2 out of 40 students, the effective date for the Half-time status reported to NSLDS at the Program- Level Record did not match the Campus-Level Record by 23-49 days. • For 1 out of 40 students, the Published Program Length was reported at 1.5 years rather than 1.1 years. Possible Cause and Asserted Effect The control that management reviews all reports for the accuracy of all data elements prior to submission was not operating at a level to ensure that enrollment status, enrollment effective date, published program length, and OPEID number were accurately and consistently reported to NSLDS. Questioned Costs None identified. Sampling The sample was not intended to be, and was not, a statistically valid sample. Identification of Whether the Audit Finding is a Repeat of a Finding in the Immediately Prior Audit No. Recommendation We recommend the University enhance the precision of the control around the review of accuracy of the enrollment statuses, program level data records, and campus level data records within the NSLDS reporting submissions. Views of Responsible Officials The University agrees with the finding and recommendation to enhance the precision of the control around the review of accuracy of the enrollment statuses, program level data records, and campus level data records within the NSLDS reporting submissions. To further strengthen oversight and prevent recurrence, the Office of Student Financial Aid will implement documented post-submission reconciliation procedures following National Student Clearinghouse reporting cycles. These reviews will focus on high-risk enrollment reporting elements, including campus changes, program status changes, and other updates affecting NSLDS reporting, and will validate the accuracy of OPEID assignments and program-level effective dates against institutional records.
Finding 2025-001 Cash Management Identification of the federal program: U.S. Department of Health and Human Services National Institutes of Health Research and Development Cluster Assistance Listing No. Federal Program Title 43.014 Congressionally Directed Programs 47.049 Mathematical and Physical Sciences 93.172 Human Genome Research 93.393 Cancer Cause and Prevention Research 93.396 Cancer Biology Research 93.837 Cardiovascular Diseases Research 93.847 Diabetes, Digestive, and Kidney Diseases Extramural Research 93.853 Extramural Research Programs in the Neurosciences and Neurological Disorders 93.865 Child Health and Human Development Extramural Research Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303(a) requires that a non-federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.305(b)(3) requires that when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the Federal agency or pass-through entity reasonably believes the request to be improper. Condition: The College did not provide evidence of effectively designed internal controls to ensure subrecipients are paid by the College within 30 days of requests for reimbursements received by the College. Cause: The College did not ensure that its established internal control processes were operating effectively to verify that invoices from subrecipients were paid within the required 30‑day period from the date the payment request was received. Effect or potential effect: The College did not comply with the cash management requirements of Uniform Guidance to pay subrecipients within 30 days of their requests for reimbursements. Questioned costs: None. Context: EY selected and tested a sample of 44 payments to subrecipients with expenditures totaling $5,843,778 from a population of $56,294,523 during the year ended June 30, 2025. Of the 44 samples selected for testing, 12 payments to subrecipients totaling $3,490,135 were made outside the required 30‑day payment window. Identification as a repeat finding, if applicable: Not a repeat finding. Recommendation: The College should strengthen its disbursement controls by ensuring that invoices received from subrecipients are promptly identified, logged, and tracked against the 30‑day payment requirement. Views of responsible officials: Management agrees with the finding and has developed a plan to ensure subrecipients are paid within 30 days of their requests for reimbursement.
Reference Number: 2025-002 Prior Year Finding: No Federal Agency: U.S. Department Agriculture State Department Name: Department of Education Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Award Number and Year: 202424N109941 (10/1/2023 – 1/30/2025) 202424L160341 (10/1/2023 – 1/30/2025) 202525N109941 (10/1/2024 – 1/28/2026) 202522L160341 (10/1/2024 – 1/28/2026) Compliance Requirement: Reporting – Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or Specific Requirement Compliance: Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. On March 8, 2025, FSRS.gov was retired, and all subaward reporting data and functionality transitioned to SAM.gov after that date. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Department of Education (Department) did not report subaward information in accordance with FFATA requirements. Context Five of five subawards selected for testing were not reported per FFATA requirements. SEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR CHART/TABLE Cause The Department’s policies and procedures were not sufficient to ensure that required subaward information was reported accurately to FSRS no later than the end of the month following the date the subaward was issued. Internal controls did not prevent or detect the errors. Effect Subawards were not reported in accordance with FFATA requirements. Questioned costs None noted. Recommendation We recommend the Department develop procedures and internal controls to ensure that all required subawards are reported timely and accurately no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials The Department will revise and strengthen our policies and procedures to ensure full compliance with FFATA reporting requirements. Updated procedures will require that all applicable child nutrition subawards of $30,000 or more are reported in SAM.gov no later than the end of the month following the month in which the subaward is made, in accordance with Uniform Grant Guidance.
Reference Number: 2025-003 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Department Name: Department of Health and Social Services State Division: Division of Public Health Federal Program: WIC Special Supplemental Nutrition Program for Women, Infants, and Children Assistance Listing Number: 10.557 Award Number and Year: 241DE701W1003 (10/1/2023 – 9/30/2024) 251DE701W1003 (10/1/2024 – 9/30/2025) Compliance Requirement: Allowable Costs/Cost Principles – Time and Effort Reporting Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or Specific Requirement Compliance: 2 CFR Section 200.430 (8)(i) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Division of Public Health (Division) did not have evidence of timely supervisory review and approval of employee timesheets. Context One of forty timesheets selected for testing was not certified timely by a program supervisor. The timesheet was certified several months after the end of the pay period. Questioned Costs None noted. Cause The Division’s controls are not sufficient to ensure that time and effort reporting is performed and documented in a timely manner, in accordance with federal requirements. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation The Division should enhance procedures, implement proper controls, and perform additional training over time and effort reporting. The Division should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Views of Responsible Officials On March 12, 2026, an email to all WIC supervisors was issued notifying the dates that all T&E reports are due to the Administration Office. The policy was reiterated during the March 17,2026 Supervisors meeting held via Zoom.
Reference Number: 2025-004 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Department Name: Department of Health and Social Services State Division: Division of Public Health Federal Program: WIC Special Supplemental Nutrition Program for Women, Infants, and Children Assistance Listing Number: 10.557 Award Number and Year: 241DE701W1003 (10/1/2023 – 9/30/2024) Compliance Requirement: Cash Management Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or Specific Requirement Compliance: US Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing (Catalog of federal Domestic Assistance) that meet the funding threshold for a major federal assistance program under the CMIA. Treasury-State Agreements also specify the terms and conditions under which an interest liability would be incurred. Programs not covered by a Treasury-State Agreement are subject to procedures prescribed by Treasury in Subpart B of 31 CFR Part 205 (Subpart B), which at 31 CFR section 205.33(a) include the requirement for a state to minimize the time between the drawdown of federal funds and their disbursement for federal program purposes. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Division of Public Health (Division) did not have evidence of supervisory review and approval of a drawdown request. Context One of seventeen drawdown requests selected for testing did not have evidence of review and approval prior to submission. Questioned Costs None noted. Cause The Division’s controls are not sufficient to ensure that drawdown requests are reviewed and approved prior to submission in accordance with federal requirements. Effect There is an increased risk of an undetected error in a drawdown request to occur. The Division could be out of compliance with CMIA requirements. Recommendation The Division should enhance procedures and controls to ensure that drawdown requests are reviewed and approved prior to submission. Views of Responsible Officials The Division confirmed the drawdown transaction was accurate and appropriate. The Division reiterated the Cash Management procedure to all staff and confirmed their understanding. In addition, the Division has in place a review process for new staff regarding procedures with confirmation of completion. There is an established training manual which has been reviewed to ensure it contains the most update to date process. Manuals and procedures will be reviewed regularly and updated, as needed.
Reference Number: 2025-005 Prior Year Finding: 2024-005 Federal Agency: U.S. Department of Labor State Department Name: Department of Labor State Division: Division of Unemployment Insurance Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI372152255A10 (10/1/2021 – 12/31/2024) UI393142355A10 (10/1/2022 – 12/31/2025) 24A55UI000067 (10/1/2023 – 12/31/2026) 25A55UI000116 (1/1/2024 – 12/31/2027) Compliance Requirement: Special Tests and Provisions – UI Benefit Payments Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or Specific Requirement Compliance: The State Workforce Agency (SWA) is required by 20 CFR section 602.11(d) to operate and maintain a quality control system. The Benefits Accuracy Measurement (BAM) program is DOL’s quality control system designed to assess the accuracy of UI benefit payments and denied claims, unless the SWA is exempted from such requirement (20 CFR section 602.22). The program estimates error rates, that is, numbers of claims improperly paid or denied, and dollar amounts of benefits improperly paid or denied, by projecting the results from investigations of statistically sound random samples to the universe of all claims paid and denied in a state. Specifically, the SWA’s BAM unit is required to draw a weekly sample of payments and denied claims, complete prompt, and in-depth investigations to determine if the administration of the UC program is consistent with state and federal law (20 CFR section 602.21(d)). As presented in the ET Handbook No. 395, the investigation involves a review of state agency records, as well as contacting the claimant, employers, and third parties (either in-person, by telephone, or by fax) to conduct new and original fact-finding related to all of the information pertinent to the paid or denied claim that was sampled. BAM investigators review cases for adherence to federal and state law as well as official policy. The following time limits are established for completion of all cases for the year. (The "year" includes all batches of weeks ending in the calendar year.): • a minimum of 70% of cases must be completed within 60 days of the week ending date of the batch; • 95% of cases must be completed within 90 days of the week ending date of the batch; • a minimum of 98% of cases for the year must be completed within 120 days of the ending date of the calendar year. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Division of Unemployment Insurance (Division) did not conduct weekly BAM investigations nor complete case investigations within the requirements established in the ET Handbook No. 395. Context Nine weekly batches were selected for testing BAM investigations. For seven of nine weeks selected, the Division did not perform the required number of investigations. Eighty-five paid cases were selected for testing case review timeliness. The Division did not meet the required time limits for closing cases within 60, 90, or 120 days. Specifically, we noted the following exceptions: • 1% of cases tested were closed within 60 days which is less than the required 70%. • 13% of cases tested were closed within 90 days which is less than the required 95%. • 86% of cases tested were closed within 120 days which is less than the required 98%. • The remaining 14% of cases tested were closed in greater than 120 days. Fifty-four denied cases were selected for testing case review timeliness. The Division did not meet the required time limits for closing cases within 60, 90, or 120 days. Specifically, we noted the following exceptions: • 6% of cases tested were closed within 60 days which is less than the required 70%. • 11% of cases tested were closed within 90 days which is less than the required 95%. • 83% of cases tested were closed within 120 days which is less than the required 98%. • The remaining 17% of cases tested were closed in greater than 120 days. Thirty-three separation cases were selected for testing case review timeliness. The Division did not meet the required time limits for closing cases within 60, 90, or 120 days. Specifically, we noted the following exceptions: • 0% of cases tested were closed within 60 days which is less than the required 70%. • 15% of cases tested were closed within 90 days which is less than the required 95%. • 85% of cases tested were closed within 120 days which is less than the required 98%. • The remaining 15% of cases tested were closed in greater than 120 days. Twenty-eight nonseparation cases were selected for testing case review timeliness. The Division did not meet the required time limits for closing cases within 60, 90, or 120 days. Specifically, we noted the following exceptions: • 4% of cases tested were closed within 60 days which is less than the required 70%. • 21% of cases tested were closed within 90 days which is less than the required 95%. • 75% of cases 2ested were closed within 120 days which is less than the required 98%. • The remaining 15% of cases tested were closed in greater than 120 days. Questioned Costs Undetermined. Cause The Division experienced staffing shortages and other pressures which impacted its ability to meet BAM requirements for weekly claim investigations and time limits for closing cases. Effect Noncompliance with BAM weekly claim investigations and time limits for closing cases could delay the detection and correction of inaccurate benefit payments and denied claims. Recommendation We recommend the Division review and enhance procedures and controls to ensure that it performs weekly claim investigations and that case investigations are completed timely in accordance with the time limits established in the ET Handbook No. 395. Views of Responsible Officials The Division of Unemployment Insurance (Division) acknowledges the finding and agrees that improvements are necessary to ensure full compliance with Benefits Accuracy Measurement (BAM) program requirements. The Division recognizes the importance of conducting weekly investigations and adhering to established timeliness standards to maintain the integrity and accuracy of unemployment insurance benefit payments and denied claims. The Division notes that the identified deficiencies were primarily due to significant staffing shortages and competing operational demands, which were further exacerbated by the sustained workload associated with pandemic-related programs. These challenges affected the Division’s capacity to complete the required number of weekly investigations and to meet prescribed case completion timeframes. To address these issues, the Division has taken and will continue to take corrective actions, including: · Actively recruiting and onboarding additional staff dedicated to BAM operations. · Providing enhanced training to ensure staff are equipped to conduct timely and thorough investigations. · Implementing improved case management and tracking mechanisms to monitor timeliness and workload distribution. · Evaluating internal processes to identify efficiencies and reduce delays in case completion. The Division is committed to strengthening internal controls and ensuring compliance with federal requirements. Management will continue to monitor progress and take additional corrective actions as necessary to meet BAM performance standards moving forward.
Reference Number: 2025-006 Prior Year Finding: 2024-007 Federal Agency: U.S. Department of Labor State Department Name: Department of Labor State Division: Division of Unemployment Insurance Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI372152255A10 (10/1/2021 – 12/31/2024) UI393142355A10 (10/1/2022 – 12/31/2025) 24A55UI000067 (10/1/2023 – 12/31/2026) 25A55UI000116 (1/1/2024 – 12/31/2027) Compliance Requirement: Reporting – ETA 2208A, Quarterly UI Above-Base Report Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or Specific Requirement Compliance: ETA 2208A, Quarterly UI Above-Base Report (OMB No. 1205-0132) – Quarterly report of staff years worked and paid by program category. Reports are due no later than 30 days after the end of each quarter. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Division of Unemployment Insurance (Division) was unable to provide supporting documentation for expenditures reported in the ETA 2208A – Quarterly UI Above-Base Report. Context The September 30, 2024 and March 31, 2025 quarterly ETA 2208A reports were selected for testing and the Division was unable to provide supporting documentation for the September 30, 2024 ETA 2208A report. Questioned Costs Undetermined. Cause The Division’s internal controls were not sufficient to ensure that it maintained supporting documentation for quarterly ETA 2208A reports. Effect Auditors were unable to verify that the ETA 2208A reports submitted by the Division were accurate and agreed to supporting documentation. Recommendation The Division should review and update its reporting internal controls to ensure that ETA 2208A – Quarterly UI Above-Base Reports tie to supporting documentation and that supporting documentation is retained and readily available for audit. Views of Responsible Officials We acknowledge the audit finding that the Division was unable to provide supporting documentation for QE 09/30/2024 ETA 2208A report. Procedures have been implemented to ensure documentation used to complete the ETA 2208A is saved in clearly marked folders on our Fiscal drive for ease of retrieval. Procedures will be documented and saved for ease of retrieval and use.
Reference Number: 2025-007 Prior Year Finding: No Federal Agency: U.S. Department of Labor State Department Name: Department of Labor State Division: Division of Unemployment Insurance Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI372152255A10 (10/1/2021 – 12/31/2024) UI393142355A10 (10/1/2022 – 12/31/2025) 24A55UI000067 (10/1/2023 – 12/31/2026) 25A55UI000116 (1/1/2024 – 12/31/2027) Compliance Requirement: Reporting – ETA 2112, UI Financial Transaction Summary Type of Finding: Material Weakness in Internal Control Over Compliance Criteria or Specific Requirement Compliance: ETA 2112, UI Financial Transaction Summary (OMB No. 1205-0154) – A monthly summary of transactions, which account for all funds received in, passed through, or paid out of the state unemployment fund. Form ETA 2112 provides a summary of data pertaining to state unemployment insurance (UI) tax collections, regular benefits paid, Federal and state shares of extended benefits paid, Federal temporary program benefits paid, and other transactions affecting the Unemployment Trust Fund. In addition, it reflects specific areas where adjustments are indicated to determine the adequacy of resources available for regular unemployment benefit payments. Data from this form is also used with data from other statistical reports to study trends in financial aspects of the UI program and as a basis for solvency studies. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Division of Unemployment Insurance (Division) was unable to provide supporting documentation that ETA 2112 reports were reviewed and approved prior to submission. Context For three of three ETA 2112 reports selected for testing, the Division was unable to provide documentation that the reports had been reviewed and approved prior to submission. Questioned Costs Undetermined. Cause The Division does not have a control in place to ensure that reports are reviewed and approved prior to submission. Effect There is an increased risk of charging unallowed costs to the program if reports are not reviewed and approved prior to submission. Recommendation We recommend the Division review and enhance internal controls to ensure that ETA 2112 reports are reviewed and approved prior to submission. Views of Responsible Officials There is already a signature on the report we will now have that is signed and dated and will also add an additional line for preparer signature and date.
Reference Number: 2025-008 Prior Year Finding: 2024-010 Federal Agency: U.S. Department of Labor State Department Name: Department of Labor State Division: Division of Unemployment Insurance Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI372152255A10 (10/1/2021 – 12/31/2024) UI393142355A10 (10/1/2022 – 12/31/2025) 24A55UI000067 (10/1/2023 – 12/31/2026) 25A55UI000116 (1/1/2024 – 12/31/2027) Compliance Requirement: Allowable Cost/Cost Principles – Time and Effort Reporting Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or Specific Requirement Compliance: 2 CFR Section 200.430 (8)(i) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Division of Unemployment Insurance (Division) was unable to provide support to validate that payroll expenses charged to the federal program were reviewed. Timesheets did not have evidence of supervisory approval. Context For 2 of 60 timesheets selected for testing, the Division was unable to provide documentation that the timesheets were reviewed and approved by a supervisor. Questioned Costs Undetermined. Cause Controls were not operating effectively to ensure that time and effort reporting was performed and documented in a timely manner, in accordance with federal requirements. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation The Division should reevaluate its current process, implement proper controls, and perform additional training for time and effort reporting. The Division should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Views of Responsible Officials We agree that the division was unable to provide documentation supporting the timesheet approval as asserted. However, we respectfully disagree that the lack of timesheet approval translates into charging the program with unallowed costs. It’s important that the auditors understand that the division’s responsibility to ensure that payroll charges to the program are appropriate begins with ensuring that each employee tasked with performing program functions are hired into the correct division internal program unit (“IPU”). And then further within that IPU, instruct employees to use a specific activity code that is assigned to various federal programs. In the samples reviewed, employees properly used the correct activity code to record time for the work performed. Auditor Rejoinder In its response, the Division acknowledges that it was unable to provide documentation to auditors that timesheets were reviewed and approved. Auditors recognize that an allowable activity code was used by the employees, but without review and approval, the actual time recorded and the validity of the activity code could not be verified. However, auditors recognize that the payroll costs would be allowable if they were reviewed by a supervisor and it was determined that appropriate activity codes were used for those employees in the given time periods. Therefore, auditors did not identify questioned costs for this finding due to a lack of documentation but reiterate that there is a possibility that questioned costs may exist if the employee time charged to the program was inappropriate.
Reference Number: 2025-009 Prior Year Finding: 2024-011 Federal Agency: U.S. Department of Labor State Department Name: Department of Labor State Division: Division of Unemployment Insurance Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: 24A55UI000067 (10/1/2023 – 12/31/2026) 25A55UI000116 (10/1/2024 – 12/31/2027) Compliance Requirement: Allowable Cost/Cost Principles – General Disbursements Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or Specific Requirement Compliance: 2 CFR section 200.403 states, in part, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition Documentation to support General Disbursement transactions was not readily available for review. States are required to develop and implement internal controls to ensure proper supporting documentation is maintained and readily available for audit, but the Division of Unemployment Insurance (Division) was unable to provide supporting documentation to auditors on a timely basis. Context For three of sixty general disbursement transactions selected for testing, the Division was initially unable to provide supporting documentation and confirmed lack of support for these items to auditors. After the conclusion of audit test work, the Division provided support for the sample selections, however, it was not submitted for audit review in a timely manner. Questioned Costs None noted. Cause The Division’s procedures and controls are not sufficient to ensure timely submission of requested audit documentation. Effect Lack of effective controls could cause the Division to incur program charges without supporting documentation. Recommendation The Division should review and enhance its procedures and controls regarding general disbursements to ensure that supporting documentation is readily available upon audit request. Views of Responsible Officials We acknowledge that audit ready evidence was not produced in a timely fashion but respectfully disagree that the Division did not maintain this evidence. The lack of timely production can be attributed to lack of awareness of the proper repository where such audit evidence was maintained and/or could be easily retrieved, as opposed to no maintenance at all. We also maintain that the division was able to substantiate all expenses queried. Auditor Rejoinder On October 1, 2025, auditors sent a request to the Division for supporting documentation for sixty samples selected for testing. Documentation was provided to auditors on November 10, 2025, but for three of the sixty samples it was deemed insufficient for testing. Auditors followed up with the Division, requesting additional support for these samples, but it was not provided. On February 17, 2026, auditors met with Fiscal Management regarding the status of the outstanding supporting documentation and were informed it was not available and would not be provided. After this meeting, auditors finalized audit test work, drafted the audit finding, and sent it to the Division for a written response. On March 11, 2026, the Division provided additional support to auditors after the conclusion of audit test work. Auditors acknowledge that support was eventually provided but maintain that the Division’s procedures and controls are insufficient to ensure that adequate supporting documentation is readily available for audit.