(2024-048) Title: Internal control over Special Education level of effort needs improvement Prior Year Findings: None State Department: Education State Bureau: Commissioner’s Office Special Services & Inclusive Education Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Matching, level of effort, earmarking Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 34 CFR 300.163 The Department must establish 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. As part of the Special Education program’s level of effort, referred to as maintenance of effort (MOE) requirements, a State must not reduce the amount of State financial support for special education and related services for children with disabilities, or otherwise made available because of the excess costs of educating those children, below the amount of that support for the preceding fiscal year. This is referred to as the State’s Maintenance of State Financial Support (MSFS). Condition: The Department of Education’s (DOE) School Finance and Operations team within the Commissioner’s Office, in conjunction with DOE’s Office of Special Services & Inclusive Education, is responsible for gathering, preparing, and compiling the State’s MSFS data. The MSFS data includes State funds spent on Special Education as well as a calculation of per pupil State support for Special Education. This data, accumulated in a spreadsheet by DOE personnel, is included on DOE’s annual application under Part B of the Individuals with Disabilities Education Act (IDEA). DOE’s application review procedures include the Commissioner certifying that the State has met the MSFS for grant funds made available for Special Education and related services for children with disabilities prior to submission to the Federal government. The Office of the State Auditor (OSA) tested the fiscal year 2024 MSFS calculation and identified that outdated data was used in three formulas in the spreadsheet. While the State’s MSFS was calculated incorrectly, OSA was able to verify that the Department met MOE requirements for fiscal year 2024, which was the greater of: • $481,309,366 for total State financial support made available to Special Education and related services for children with disabilities; or • $13,470 for per capita amount of State financial support. Context: On the fiscal year 2024 IDEA Part B application, the Department reported $484,482,061 for the MSFS; however, $496,227,407 should have been reported. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • The Department is required to maintain a certain level of State financial support. An inaccurate MSFS calculation could result in the Department not meeting MOE requirements. • Inaccurate information reported to the Federal government may be used for programmatic, policy or statistical purposes. Recommendation: We recommend that the Department enhance procedures to ensure that the MSFS data reported to the Federal government is accurate and complete prior to submission. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The Office of Special Services & Inclusive Education has developed and will implement a corrective action plan to address the issue identified. Contact: Barbara McGowen, Director of Financial Management, Office of Special Services & Inclusive Education, DOE, 207-624-6645 (State Number: 24-1201-02)
(2024-049) Title: Internal control over ESF subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education State Bureau: Commissioner’s Office Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425R, 84.425U Federal Award Identification Number: See E-77 to E-78 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.313; 2 CFR 200.332 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. For equipment acquired with Federal funding, records must be maintained that include: • a description and identification number; • the source of funding, including the Federal Award Identification Number; • who holds title and the acquisition date; • the cost of the property, including the percentage of Federal participation in the project costs for the Federal award under which the property was acquired; • the location, use and condition; and • any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 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 Education Stabilization Fund (ESF) provides funding to school administrative units (SAUs) to purchase equipment for use in preventing, preparing for, or responding to the COVID-19 pandemic. All SAU equipment purchases reimbursed with ESF are subject to applicable inventory control, log maintenance, and disposition requirements consistent with Federal regulations for equipment and real property management. In the fiscal year 2022 and 2023 audits, the Office of the State Auditor identified that the Department did not have procedures in place to track SAU equipment purchases reimbursed with ESF. During fiscal year 2024, the Department developed policies and procedures to track SAU equipment purchases reimbursed with ESF. These procedures outline documentation to be obtained from SAUs during the next subrecipient monitoring activity. Because the Department has not completed the subrecipient monitoring to obtain the necessary documentation, the Department does not have assurance that: • a complete and accurate record of all equipment purchased with ESF was maintained by each SAU. • subrecipients are in compliance with Federal regulations for equipment and real property management. Context: In fiscal year 2024, ESF expenditures totaled $194.1 million, of which $175.1 million was paid to subrecipient SAUs. Because a complete and accurate record of equipment purchased with ESF is not maintained, the amount of equipment purchased in fiscal year 2024 is unknown. Cause: • Newly developed policies and procedures have not been fully implemented. • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • SAUs may not be in compliance with equipment and real property management requirements. • Recordkeeping for assets purchased with ESF is not adequate, and as a result, the assets may not be properly safeguarded. Recommendation: We recommend that the Department conduct necessary subrecipient monitoring activities to ensure that a complete and accurate record of all equipment purchased with ESF is maintained by the Department and by each SAU. This record should be documented and maintained in order to verify ongoing compliance with Federal regulations for equipment and real property management. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The former Office of Federal Emergency Relief Programs will incorporate the collection of this information in the fiscal year 2024 and 2025 annual performance report. All equipment purchased with ESF will be self-reported by each individual School Administrative Unit. Contact: Shelly Chasse-Johndro, Director, ESEA, DOE, 207-458-3180 (State Number: 24-1235-01)
(2024-049) Title: Internal control over ESF subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education State Bureau: Commissioner’s Office Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425R, 84.425U Federal Award Identification Number: See E-77 to E-78 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.313; 2 CFR 200.332 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. For equipment acquired with Federal funding, records must be maintained that include: • a description and identification number; • the source of funding, including the Federal Award Identification Number; • who holds title and the acquisition date; • the cost of the property, including the percentage of Federal participation in the project costs for the Federal award under which the property was acquired; • the location, use and condition; and • any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 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 Education Stabilization Fund (ESF) provides funding to school administrative units (SAUs) to purchase equipment for use in preventing, preparing for, or responding to the COVID-19 pandemic. All SAU equipment purchases reimbursed with ESF are subject to applicable inventory control, log maintenance, and disposition requirements consistent with Federal regulations for equipment and real property management. In the fiscal year 2022 and 2023 audits, the Office of the State Auditor identified that the Department did not have procedures in place to track SAU equipment purchases reimbursed with ESF. During fiscal year 2024, the Department developed policies and procedures to track SAU equipment purchases reimbursed with ESF. These procedures outline documentation to be obtained from SAUs during the next subrecipient monitoring activity. Because the Department has not completed the subrecipient monitoring to obtain the necessary documentation, the Department does not have assurance that: • a complete and accurate record of all equipment purchased with ESF was maintained by each SAU. • subrecipients are in compliance with Federal regulations for equipment and real property management. Context: In fiscal year 2024, ESF expenditures totaled $194.1 million, of which $175.1 million was paid to subrecipient SAUs. Because a complete and accurate record of equipment purchased with ESF is not maintained, the amount of equipment purchased in fiscal year 2024 is unknown. Cause: • Newly developed policies and procedures have not been fully implemented. • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • SAUs may not be in compliance with equipment and real property management requirements. • Recordkeeping for assets purchased with ESF is not adequate, and as a result, the assets may not be properly safeguarded. Recommendation: We recommend that the Department conduct necessary subrecipient monitoring activities to ensure that a complete and accurate record of all equipment purchased with ESF is maintained by the Department and by each SAU. This record should be documented and maintained in order to verify ongoing compliance with Federal regulations for equipment and real property management. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The former Office of Federal Emergency Relief Programs will incorporate the collection of this information in the fiscal year 2024 and 2025 annual performance report. All equipment purchased with ESF will be self-reported by each individual School Administrative Unit. Contact: Shelly Chasse-Johndro, Director, ESEA, DOE, 207-458-3180 (State Number: 24-1235-01)
(2024-049) Title: Internal control over ESF subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education State Bureau: Commissioner’s Office Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425R, 84.425U Federal Award Identification Number: See E-77 to E-78 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.313; 2 CFR 200.332 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. For equipment acquired with Federal funding, records must be maintained that include: • a description and identification number; • the source of funding, including the Federal Award Identification Number; • who holds title and the acquisition date; • the cost of the property, including the percentage of Federal participation in the project costs for the Federal award under which the property was acquired; • the location, use and condition; and • any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 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 Education Stabilization Fund (ESF) provides funding to school administrative units (SAUs) to purchase equipment for use in preventing, preparing for, or responding to the COVID-19 pandemic. All SAU equipment purchases reimbursed with ESF are subject to applicable inventory control, log maintenance, and disposition requirements consistent with Federal regulations for equipment and real property management. In the fiscal year 2022 and 2023 audits, the Office of the State Auditor identified that the Department did not have procedures in place to track SAU equipment purchases reimbursed with ESF. During fiscal year 2024, the Department developed policies and procedures to track SAU equipment purchases reimbursed with ESF. These procedures outline documentation to be obtained from SAUs during the next subrecipient monitoring activity. Because the Department has not completed the subrecipient monitoring to obtain the necessary documentation, the Department does not have assurance that: • a complete and accurate record of all equipment purchased with ESF was maintained by each SAU. • subrecipients are in compliance with Federal regulations for equipment and real property management. Context: In fiscal year 2024, ESF expenditures totaled $194.1 million, of which $175.1 million was paid to subrecipient SAUs. Because a complete and accurate record of equipment purchased with ESF is not maintained, the amount of equipment purchased in fiscal year 2024 is unknown. Cause: • Newly developed policies and procedures have not been fully implemented. • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • SAUs may not be in compliance with equipment and real property management requirements. • Recordkeeping for assets purchased with ESF is not adequate, and as a result, the assets may not be properly safeguarded. Recommendation: We recommend that the Department conduct necessary subrecipient monitoring activities to ensure that a complete and accurate record of all equipment purchased with ESF is maintained by the Department and by each SAU. This record should be documented and maintained in order to verify ongoing compliance with Federal regulations for equipment and real property management. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The former Office of Federal Emergency Relief Programs will incorporate the collection of this information in the fiscal year 2024 and 2025 annual performance report. All equipment purchased with ESF will be self-reported by each individual School Administrative Unit. Contact: Shelly Chasse-Johndro, Director, ESEA, DOE, 207-458-3180 (State Number: 24-1235-01)
(2024-050) Title: Internal control over ICA program subrecipient cash management 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 Contract Management Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Immunization Cooperative Agreements (COVID-19) Assistance Listing Number: 93.268 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305; 2 CFR 200.332 The Department must establish 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. The Department must monitor the activities of the subrecipient as necessary to ensure that subawards are used for authorized purposes and in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. Condition: The Department’s Division of Contract Management (DCM) has three methods for providing payments to subrecipients: cost-settled, cost-settled by invoice, and fee-for-service subawards. • For cost-settled subawards, DCM procedures include making equal advance monthly payments and then reconciling those amounts to the 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. • For “cost-settled by invoice” (reimbursement) subawards, DCM procedures do not require subrecipients to include supporting documentation with monthly requests for reimbursement nor do they request supporting documentation at a subsequent date. 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. • Cash management requirements are not applicable for fee-for-service subawards. Maine Center for Disease Control & Prevention (MeCDC) is responsible for ensuring the Immunization Cooperative Agreement (ICA) program’s subrecipients comply with Federal requirements; however, MeCDC’s subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. The ICA program’s subawards are either cost-settled or cost-settled by invoice. Therefore, DCM and MeCDC procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Additionally, MeCDC’s monitoring procedures do not include review of subrecipient invoices to ensure ICA grant funds are used for allowable purposes. Context: In fiscal year 2024, the Department provided $1.9 million to subrecipients from ICA grant funds totaling $31.1 million. 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: • collaborate with DCM to 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 ICA program. • implement monitoring procedures over ICA program subrecipients to ensure that grant funds are used for allowable purposes. 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 funds. Payments are made as close as 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: Anthony Madden, Deputy Director, Division of Audit, DHHS, 207-287-2834 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation selectively emphasizes a single sentence from the broader paragraph, omitting critical context that informs the regulation’s full intent. According to the 2024 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 section 200.305(b)(1)). 2 CFR section 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. A full reading of the provision indicates that “administratively feasible” does not negate the obligation to implement effective controls that minimize this gap, nor does it permit delays or inadequate oversight in Federal cash management. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. Additionally, the Department does not require subrecipients to submit invoice documentation to substantiate the timing, amount, or nature of expenditures included in the request of Federal funds. As a result, the Department cannot demonstrate an adequate level of monitoring, as there is no evidence that they collect the necessary information to ensure compliance with Federal cash management requirements. Furthermore, the Department did not comment on the lack of monitoring procedures over subrecipient invoices to ensure Federal grant funds are used for allowable purposes. The finding remains as stated. (State Number: 24-1118-01)
(2024-050) Title: Internal control over ICA program subrecipient cash management 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 Contract Management Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Immunization Cooperative Agreements (COVID-19) Assistance Listing Number: 93.268 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305; 2 CFR 200.332 The Department must establish 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. The Department must monitor the activities of the subrecipient as necessary to ensure that subawards are used for authorized purposes and in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. Condition: The Department’s Division of Contract Management (DCM) has three methods for providing payments to subrecipients: cost-settled, cost-settled by invoice, and fee-for-service subawards. • For cost-settled subawards, DCM procedures include making equal advance monthly payments and then reconciling those amounts to the 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. • For “cost-settled by invoice” (reimbursement) subawards, DCM procedures do not require subrecipients to include supporting documentation with monthly requests for reimbursement nor do they request supporting documentation at a subsequent date. 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. • Cash management requirements are not applicable for fee-for-service subawards. Maine Center for Disease Control & Prevention (MeCDC) is responsible for ensuring the Immunization Cooperative Agreement (ICA) program’s subrecipients comply with Federal requirements; however, MeCDC’s subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. The ICA program’s subawards are either cost-settled or cost-settled by invoice. Therefore, DCM and MeCDC procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Additionally, MeCDC’s monitoring procedures do not include review of subrecipient invoices to ensure ICA grant funds are used for allowable purposes. Context: In fiscal year 2024, the Department provided $1.9 million to subrecipients from ICA grant funds totaling $31.1 million. 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: • collaborate with DCM to 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 ICA program. • implement monitoring procedures over ICA program subrecipients to ensure that grant funds are used for allowable purposes. 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 funds. Payments are made as close as 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: Anthony Madden, Deputy Director, Division of Audit, DHHS, 207-287-2834 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation selectively emphasizes a single sentence from the broader paragraph, omitting critical context that informs the regulation’s full intent. According to the 2024 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 section 200.305(b)(1)). 2 CFR section 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. A full reading of the provision indicates that “administratively feasible” does not negate the obligation to implement effective controls that minimize this gap, nor does it permit delays or inadequate oversight in Federal cash management. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. Additionally, the Department does not require subrecipients to submit invoice documentation to substantiate the timing, amount, or nature of expenditures included in the request of Federal funds. As a result, the Department cannot demonstrate an adequate level of monitoring, as there is no evidence that they collect the necessary information to ensure compliance with Federal cash management requirements. Furthermore, the Department did not comment on the lack of monitoring procedures over subrecipient invoices to ensure Federal grant funds are used for allowable purposes. The finding remains as stated. (State Number: 24-1118-01)
(2024-052) Title: Internal control over payments made to TANF clients 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-77 to E-78 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.558 $1,014 Likely Questioned Costs: Undeterminable; incorrectly calculating Temporary Assistance for Needy Families (TANF) benefits may result in overpayments or underpayments to clients. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 263.11 The Department must establish 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 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 Department issues TANF payments directly to TANF clients for various items and services, and to providers on behalf of TANF clients for services rendered such as child care and transportation. The Office of the State Auditor (OSA) tested 60 payments and found that: • one payment issued in July 2023 overpaid a TANF client a total of $200 for clothing. An advance allowance of $200 was issued to the TANF client; however, the TANF client did not submit a receipt substantiating the purchase as required. OSA is questioning costs totaling $200. • four payments issued for transportation were calculated by the Department using a distance other than the most direct route as required. The payments include: o one payment issued in August 2023 that overpaid a TANF client a total of $87. Upon further review, OSA found an additional $524 that was overpaid to the client during fiscal year 2024. OSA is questioning costs totaling $611. o one payment issued in August 2023 that overpaid a TANF client a total of $8. Upon further review, OSA found an additional $107 was overpaid to the client during fiscal year 2024. OSA is questioning costs totaling $115. o one payment issued in March 2024 that overpaid a TANF client a total of $1. Upon further review, OSA found an additional $15 that was overpaid to the client during fiscal year 2024. OSA is questioning costs totaling $16. o one payment issued in October 2023 that underpaid a TANF client a total of $2. Upon further review, OSA found an additional $17 that was underpaid to the client during fiscal year 2024. • two payments issued in June 2024 overpaid a TANF household a total of $72 for transportation. Two $36 bus passes were paid for two clients in the same household, prior to determining program eligibility. OSA is questioning costs totaling $72. OSA selected a non-statistical random sample. Context: In fiscal year 2024, payments to TANF clients for services other than direct cash benefits totaled $2.3 million. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Known questioned costs • 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; and • establish recoupments for the identified overpayments. Corrective Action Plan: See F-22 Management’s Response: The Department partially agrees with this finding. The Department agrees with and acknowledges both the Condition Statement and the first two Recommendations contained in this finding as reflected in the Departments corrective action plan. The third Recommendation, establish recoupments for the identified overpayments, is already a business process within the OFI Overpayments Team. For clarity, the TANF team ‘refers’ as per policies established in Rule and the Overpayments Team ‘establishes recoupments’. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: OSA acknowledges the Department’s assertion that the establishment of recoupments for identified overpayments is an existing business process; however, current procedures are not adequate. This is evidenced by the six overpayments identified in the Condition for which recoupments had not yet been established as of audit testing. The finding remains as stated. (State Number: 24-1111-05)
(2024-053) 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-77 to E-78 Compliance Area: Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 205.55 and .56 The Department must establish 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 (SWICA) 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 resolve all discrepancies identified through IEVS within 45 days of receipt and document the resolution in ACES. Federal guidance over the Temporary Assistance for Needy Families (TANF) program outlines audit procedures to ensure that the State has established and implemented the required IEVS exchange for data matching and verification of such data. These procedures include testing a sample of TANF cases subject to IEVS. The Office of the State Auditor (OSA) requested a list of TANF cases subject to IEVS for testing purposes; in response, the Department provided OSA with all IEVS discrepancy reports run in fiscal year 2024. The reports provided by the Department contained TANF, SNAP, and Medicaid/Medicare cases and did not have specific Federal program indicators for the entirety of fiscal year 2024. The Department began adding specific Federal program indicators in October 2023; therefore, without a population of TANF-specific cases for July through September 2023, OSA is unable to verify that the program is in compliance with Federal IEVS requirements. For the remaining reports provided for fiscal year 2024 where the Federal program indicator was noted, OSA tested 70 TANF-specific IEVS discrepancies and found: • one resolution was not documented in ACES. • four discrepancies were resolved between 26 and 125 days past the 45-day requirement. OSA selected a non-statistical random sample. In addition, the Department disclosed that no reviews of the Quarterly Income Discrepancy Reports were completed during fiscal year 2024. As a result, wage information from SWICA was not utilized to ensure eligibility determinations were made based on current information. Context: 224 IEVS reports are required to be generated annually. Of the 224 reports generated, OSA tested 126 reports and was unable to test 98 reports to ensure compliance with Federal IEVS requirements. The number of TANF discrepancies on each report can vary. Cause: • Lack of resources • Lack of supervisory oversight Effect: • IEVS information may not be updated timely in ACES, which could result in incorrect eligibility determinations. • 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 two percent of the grant award. Recommendation: We recommend that the Department increase oversight to ensure that all discrepancies identified through IEVS are resolved within 45 days of receipt and documented in ACES. Corrective Action Plan: See F-23 Management’s Response: The Department agrees resources need to be dedicated to complete the review of the SWICA reports. Implementation of program indicators on IEVS reports began in October of 2023 for the purpose of assisting OSA in their testing. OSA had received all reports, containing all data necessary to conduct testing. It should be noted this requirement has no utility in current eligibility determinations due to the age of the data. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: As stated in the Condition, program indicators on IEVS reports began in October 2023; therefore, OFI could not provide a population of TANF-specific cases for July through September 2023. As a result, OSA is unable to verify that the program is in compliance with Federal IEVS requirements. Additionally, while the Department agrees “resources need to be dedicated to complete the review of the SWICA reports,” the Department did not comment on the noncompliance identified by OSA in testing the Federal IEVS requirements. 45 CFR 205.56 requires the Department to review and compare information obtained from each data exchange against information contained in case records to determine whether the applicant or recipient’s eligibility or the amount of assistance is affected. If the information is received during the application period, the Department shall use such information, to the extent possible, in making the eligibility determination. Therefore, the extent to which the utility of this requirement is affected by “the age of the data” has a direct correlation to the Department’s ability to process the information contained in each data exchange in a timely manner. The finding remains as stated. (State Number: 24-1111-02)
(2024-054) Title: Internal control over TANF client child support sanction 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-77 to E-78 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 264.30; 42 USC 608(a)(2) The Department must establish 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. If the Department determines that an individual is not cooperating with child support enforcement requirements, the Department is required to sanction the individual by deducting an amount equal to not less than 25 percent from the Temporary Assistance for Needy Families (TANF) assistance that would otherwise be provided to the family of the individual and may deny the family any TANF assistance. Condition: The Division of Support Enforcement and Recovery (DSER) is responsible for enforcing child support requirements for clients receiving benefits from the TANF program, which is administered by the Office for Family Independence (OFI). When individuals not cooperating with child support enforcement requirements are identified, DSER personnel initiate a sanction memo in the Child Support Enforcement of Maine (CSEME) system indicating the date of noncooperation with child support requirements. A sanction request is then emailed, with the memo attached, to TANF personnel. After receiving the emailed sanction request, TANF personnel review the individual’s case and determine if a sanction should be applied. The child support sanction process is documented in DSER policy, which specifies that failing to generate and attach the sanction memo to the emailed request will deem the referral invalid. TANF procedures, however, include processing sanction requests with or without an attached sanction memo. Federal guidance requires the Office of the State Auditor (OSA) to develop audit procedures in order to test a sample of individual sanction requests referred to TANF by DSER. For this reason, OSA requested a list of all fiscal year 2024 sanction requests referred to TANF by DSER. In response, DSER provided a report of all sanction memos initiated in the CSEME system with dates of noncooperation during fiscal year 2024; however, this report does not represent an accurate and complete population for audit testing, as the referral action occurs subsequent to the initiation of a sanction memo and outside of the CSEME system, through email. Additional documentation representative of a complete population could not be provided, as TANF does not have policies and procedures in place to ensure that documentation of all individual sanction requests referred to TANF by DSER is properly maintained. As a result, OSA is unable to test to ensure OFI is in compliance with child support sanction requirements. Context: DSER provided a report of 469 sanction memos initiated for fiscal year 2024. The number of sanction requests that were made but omitted from the DSER list is unknown. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliant clients may be paid benefits that they are not entitled to receive. • Failure to maintain appropriate documentation to demonstrate compliance with Federal program sanction requirements may result in the U.S. Department of Health and Human Services penalizing the State up to five percent of the grant award. Recommendation: We recommend that OFI establish procedures to ensure all child support sanction requests can be provided so that audit procedures can be performed in accordance with Federal regulations. We further recommend that OFI increase oversight to ensure compliance with Federal requirements. Corrective Action Plan: See F-23 Management’s Response: The Department disagrees with this finding. The audit objective identified in the Compliance Supplement is to “Determine whether, after notification by the state Title IV-D agency, the TANF agency has taken necessary action to reduce or deny TANF assistance.” One of the two suggested audit procedures is to “Test a sample of cases referred by the Title IV-D agency to the TANF agency to ascertain if benefits were reduced or denied as required.” The Department spent a lot of time and effort attempting to validate for OSA that it had a testable population, and the Department believes that the Office of State Auditor can perform this procedure either with the DSER-provided report of referrals or with that report in conjunction with the additional material (including active sanction activity within the fiscal year as provided by OFI) the Department has pulled and analyzed for OSA. In the absence of that review nothing in the Department’s records, data, or discussions with OSA could reasonably be interpreted to suggest a “significant deficiency” in its Internal Controls over this aspect of the TANF program. There has not been any evidence that referrals made from DSER to OFI are getting lost, ignored, or misapplied. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Department is required to establish and maintain effective internal control over Federal awards. The significant deficiency identified within the Condition is not the result of disagreements over the interpretation of Federal regulations or related audit objectives and testing procedures, it is related to internal control. A significant deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with requirements of a Federal program on a timely basis. The Department does not have adequate controls in place in order to provide a complete and accurate report of sanction requests referred to TANF by DSER. This report should not only be available for audit testing purposes, but also as documentation to monitor and attest to the Department’s compliance with TANF program sanction requirements. OSA acknowledges that multiple information sources and reports were provided in response to audit requests; however, the suggestion that OSA can perform testing “with the DSER-provided report of referrals” is not valid, as it is a CSEME system report that shows what should have been referred, and not actual referrals. Furthermore, the suggestion that OSA can perform testing “with [the DSER-provided report] in conjunction with the additional material” would result in OSA violating auditor independence as defined in Government Auditing Standards, as auditors cannot create the population subject to testing. Evidenced by the inability to provide a complete and accurate report, the Department is not properly tracking referrals to ensure that they are not “lost, ignored, or misapplied,” and therefore, is not properly overseeing compliance with 45 CFR 264.30. As a result, OSA cannot test that the Department is in compliance with the requirement to sanction individuals not cooperating with child support enforcement. The finding remains as stated. (State Number: 24-1111-01)
(2024-055) Title: Internal control over TANF program subrecipient cash management 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 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-77 to E-78 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305; 2 CFR 200.332 The Department must establish 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. The Department must monitor the activities of the subrecipient as necessary to ensure that subawards are used for authorized purposes and in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. Condition: The Department’s Division of Contract Management (DCM) has three methods for providing payments to subrecipients: cost-settled, cost-settled by invoice, and fee-for-service subawards. • For cost-settled subawards, DCM procedures include making equal advance monthly payments and then reconciling those amounts to the 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. • For “cost-settled by invoice” (reimbursement) subawards, DCM procedures do not require subrecipients to include supporting documentation with monthly requests for reimbursement nor do they request supporting documentation at a subsequent date. 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. • Cash management requirements are not applicable for fee-for-service subawards. The Office for Family Independence (OFI) is responsible for ensuring the Temporary Assistance for Needy Families (TANF) program’s subrecipients comply with Federal requirements; however, OFI’s subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. The TANF program’s subawards are cost-settled, cost-settled by invoice, or fee-for-service. Therefore, DCM and OFI procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Additionally, OFI’s monitoring procedures do not include review of subrecipient invoices to ensure TANF grant funds are used for allowable purposes. Context: In fiscal year 2024, the Department provided $34.2 million to subrecipients from TANF grant funds totaling $92.4 million. 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 OFI: • collaborate with DCM to 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 TANF program. • implement monitoring procedures over TANF program subrecipients to ensure that grant funds are used for allowable purposes. Corrective Action Plan: See F-23 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 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: Anthony Madden, Deputy Director, Division of Audit, DHHS, 207-287-2834 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation selectively emphasizes a single sentence from the broader paragraph, omitting critical context that informs the regulation’s full intent. According to the 2024 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 section 200.305(b)(1)). 2 CFR section 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. A full reading of the provision indicates that “administratively feasible” does not negate the obligation to implement effective controls that minimize this gap, nor does it permit delays or inadequate oversight in Federal cash management. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. Additionally, the Department does not require subrecipients to submit invoice documentation to substantiate the timing, amount, or nature of expenditures included in the request of Federal funds. As a result, the Department cannot demonstrate an adequate level of monitoring, as there is no evidence that they collect the necessary information to ensure compliance with Federal cash management requirements. Furthermore, the Department did not comment on the lack of monitoring procedures over subrecipient invoices to ensure Federal grant funds are used for allowable purposes. The finding remains as stated. (State Number: 24-1111-04)
(2024-056) 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 Division of Contract Management 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-77 to E-78 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 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 determines subrecipient monitoring procedures based on the justification for the selection of the subrecipient and the services provided. If a subaward is competitively bid, the Department’s Division of Contract Management’s (DCM) Competitive Procurement Unit seeks input from the Department of Health and Human Services’ Service Center, the Department’s Division of Audit, and DCM’s Contracts Unit regarding known issues with the provider who submitted the bid. Those responses are collected and provided to the evaluation team, which consists of various program personnel. However, for both competitively bid and non-competitively bid subawards, the level of subrecipient monitoring that the Department performs is based on the services provided and not based on the specific subrecipient. The Office of the State Auditor (OSA) selected six TANF subrecipients, which included 11 subawards that were competitively bid and eight subawards that were not competitively bid and found that for: • seven competitively bid subawards, DCM provided evidence to support that feedback was solicited from other Bureaus for any known issues or prior noncompliance; however, evidence could not be provided to support the level of subrecipient monitoring that was performed based on a risk evaluation. • four competitively bid subawards, DCM could not provide evidence to support that feedback was solicited from other Bureaus for any known issues or prior noncompliance. In addition, evidence could not be provided to support the level of subrecipient monitoring that was performed based on a risk evaluation. • eight non-competitively bid subawards, evidence could not be provided to support the level of subrecipient monitoring that was performed based on a risk evaluation. OSA selected a non-statistical random sample. Context: The Department provided $34.2 million from a total of $92.4 million to TANF subrecipients during fiscal year 2024. 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-24 Management’s Response: The Department disagrees with this finding. The Department evaluates risk on its subrecipients for the purpose 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: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 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’s assessments are inconsistent with Federal regulation 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. As stated in the Condition, for both competitively bid and non-competitively bid subawards, the level of subrecipient monitoring that the Department performs is based on the services provided, rather than on an evaluation of risk assessed for specific subrecipients. • 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 The Department did not provide documentation to support that the level of subrecipient monitoring performed correlates to MAAP; and 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: 24-1111-07)
(2024-057) 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-77 to E-78 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 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 and ACF-209 SSP-MOE 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 (ACES) to comprise client work participation data that is reported on the ACF-199 and ACF-209 reports to the Federal government. The Department reported incorrect work participation information on the ACF-199 and ACF-209 reports. Of the 60 clients tested, 24 inaccurate work participation data elements were reported for 19 clients, including inaccurate: • countable months towards the Federal time limit of 60 months for nine cases; • work participation status for three cases; • unsubsidized employment and vocational education training hours for nine cases; • Federal time limit provision status for one case; • family affiliation status for one case; and • work eligible individual indicator for one case. The Office of the State Auditor selected a non-statistical random sample. Context: In fiscal year 2024, the number of families reported on the ACF-199 report ranged from 10,000 to 11,000 per quarter, and the number of clients reported on the ACF-209 report ranged from 29,000 to 31,000 per quarter. Cause: • Lack of adequate procedures to ensure accurate reporting • Lack of supervisory oversight Effect: Incorrect 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 and ACF-209 reports is accurate and complete prior to submission to the Federal government. Corrective Action Plan: See F-24 Management’s Response: The Department agrees with and acknowledges both the Condition Statement and Recommendation sections contained in this finding. The Department has developed and will implement a corrective action plan to address the Condition. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 24-1111-03)
(2024-058) 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-77 to E-78 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 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 five 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 60 ACRT reviews performed during fiscal year 2024 and found: • two reviews did not indicate the date that the review was performed; and • seven reviews did not document that follow up occurred for identified actions required by the subrecipient service provider, or dates that actions were taken and reported. OSA selected a non-statistical random sample. Additionally, 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 and ACF-209 SSP-MOE Data Report to the Federal government. OSA identified a significant deficiency as issued in finding 2024-057 for inaccurate work participation data reported on the ACF-199 and ACF-209 reports. 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 procedures to ensure that ACRT reviews are accurate and complete and work verification plan requirements are met • Lack of supervisory oversight Effect: The Federal government may penalize the State by an amount not less than one percent and not more than five 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 accurate and complete which will ensure the reliability of client data used to calculate work participation rates and reported to the Federal government. Corrective Action Plan: See F-24 Management’s Response: The Department agrees with this finding. The Department acknowledges the exceptions found as a result of the non-statistical random sample correctly identified improperly completed reviews: two reviews did not indicate the date that the review was performed; and seven reviews did not document that follow up occurred for identified actions required by the subrecipient service provider, or dates that actions were taken and reported. The Department has developed a Corrective Action Plan to mitigate the risk of such errors from recurring. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 24-1111-06)
(2024-059) Title: Internal control over CCDF financial reporting 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: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Matching, level of effort, earmarking Reporting Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.575 $3.7 million Likely Questioned Costs: ALN 93.575 $3.7 million Criteria: 2 CFR 200.303; 45 CFR 98.50 and .65; OMB-0970-0510 ACF-696 Report Instructions The Department must establish 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; all other non-direct services; and • 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. From discretionary amounts provided for a fiscal year, the Department must spend at a minimum 70 percent for direct services after reserving the minimum amount required for quality activities and for 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 four ongoing Federal grant award years during fiscal year 2024, for grant years 2021, 2022, 2023, and 2024. For each grant award: • quarterly CCDF ACF-696 financial status reports are required, and • applicable earmarking requirements for direct childcare subsidies, quality activities, and administrative costs must be met. 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. DHHS SC also monitors CCDF program earmarking requirements as part of this quarterly reporting process. The Office of the State Auditor (OSA) reviewed three quarterly ACF-696 reports and found that: • in all reports reviewed, 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. • the State did not report any non-direct expenditures during fiscal year 2024. The spreadsheet utilized by DHHS SC during the reporting process did not include detailed expenditure information in order to separately report direct and non-direct expenditures. In addition, although administrative and quality earmarking requirements were tracked on DHHS SC’s spreadsheet and during the reporting process, the direct childcare subsidy earmarking requirement was not tracked. Because expenditures were not accurately tracked and therefore reported inaccurately on the ACF-696 reports, calculations of the administrative and direct spending limits were also not accurate. As a result, the requirement that a minimum of 70 percent of expenditures be used for direct childcare subsidies, after administrative and quality earmarking requirements, was not met for the grant year 2021 and 2022 expenditures, as follows: • For grant year 2021, the Department was required to spend a minimum of $13.4 million in direct childcare expenditures, and thus a maximum of $5.8 million in all other expenditures after administrative and quality earmarking requirements; however, the Department only spent $11.9 million in direct childcare expenditures. Since grant year 2021 funds were fully expended, the direct childcare earmarking requirement was not met by $1.5 million, and all other expenditures were overspent by $1.5 million. Therefore, OSA is reporting $1.5 million in questioned costs. • For grant year 2022, the Department was required to spend a minimum of $9.7 million in direct childcare expenditures, and thus a maximum of $4.2 million in all other expenditures after administrative and quality earmarking requirements; however, the Department only spent $7.5 million. Since grant year 2022 funds were fully expended, the direct childcare earmarking requirement was not met by $2.2 million, and all other expenditures were overspent by $2.2 million. Therefore, OSA is reporting $2.2 million in questioned costs. As a result, OSA is reporting a total of $3.7 million in questioned costs, representative of the direct childcare earmarking discrepancies and resulting amount of all other costs overspent for the 2021 and 2022 grant years. Context: CCDF expenditures reported for: • grant year 2021 totaled $186.5 million, of which $19.2 million was subject to the 70 percent direct childcare spending requirement of $13.4 million. • grant year 2022 totaled $30.9 million, of which $13.9 million was subject to the 70 percent direct childcare spending requirement of $9.7 million. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations for reporting and earmarking Recommendation: We recommend that the Departments enhance existing procedures, including corrections to expenditure tracking processes, and increase supervisory oversight to ensure that all the information reported on quarterly ACF-696 reports is accurate and complete prior to submission to the Federal government. This will also ensure that CCDF earmarking requirements are met. Corrective Action Plan: See F-24 Management’s Response: The Department partially agrees with this finding. The Department and the DHHS Financial Service Center agrees that it could enhance its policies and procedures. The Department disagrees with the questioned costs. The DHHS Financial Service Center will enhance policies and procedures for the CCDF grant by modifying the FSR Reviewer Checklist and add an additional layer of FSR reviewer by April 30, 2025. The DHHS Financial Service Center will collaborate with OCFS to make reporting line determinations by September 1, 2025. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 Auditor’s Concluding Remarks: The Department agrees to the internal control deficiencies and to the noncompliance with Federal reporting and earmarking requirements identified in the Condition, yet does not agree to the resulting questioned costs. Furthermore, the Department does not provide a basis for this disagreement. The total of $3.7 million in questioned costs is representative of the direct childcare earmarking discrepancies and resulting amount of all other costs overspent for the 2021 and 2022 grant years. The overspending on all other costs is deemed unallowable in accordance with the terms of the grant awards, as the funds were required to be spent on direct childcare. The finding remains as stated. (State Number: 24-1114-01)
(2024-059) Title: Internal control over CCDF financial reporting 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: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Matching, level of effort, earmarking Reporting Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.575 $3.7 million Likely Questioned Costs: ALN 93.575 $3.7 million Criteria: 2 CFR 200.303; 45 CFR 98.50 and .65; OMB-0970-0510 ACF-696 Report Instructions The Department must establish 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; all other non-direct services; and • 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. From discretionary amounts provided for a fiscal year, the Department must spend at a minimum 70 percent for direct services after reserving the minimum amount required for quality activities and for 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 four ongoing Federal grant award years during fiscal year 2024, for grant years 2021, 2022, 2023, and 2024. For each grant award: • quarterly CCDF ACF-696 financial status reports are required, and • applicable earmarking requirements for direct childcare subsidies, quality activities, and administrative costs must be met. 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. DHHS SC also monitors CCDF program earmarking requirements as part of this quarterly reporting process. The Office of the State Auditor (OSA) reviewed three quarterly ACF-696 reports and found that: • in all reports reviewed, 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. • the State did not report any non-direct expenditures during fiscal year 2024. The spreadsheet utilized by DHHS SC during the reporting process did not include detailed expenditure information in order to separately report direct and non-direct expenditures. In addition, although administrative and quality earmarking requirements were tracked on DHHS SC’s spreadsheet and during the reporting process, the direct childcare subsidy earmarking requirement was not tracked. Because expenditures were not accurately tracked and therefore reported inaccurately on the ACF-696 reports, calculations of the administrative and direct spending limits were also not accurate. As a result, the requirement that a minimum of 70 percent of expenditures be used for direct childcare subsidies, after administrative and quality earmarking requirements, was not met for the grant year 2021 and 2022 expenditures, as follows: • For grant year 2021, the Department was required to spend a minimum of $13.4 million in direct childcare expenditures, and thus a maximum of $5.8 million in all other expenditures after administrative and quality earmarking requirements; however, the Department only spent $11.9 million in direct childcare expenditures. Since grant year 2021 funds were fully expended, the direct childcare earmarking requirement was not met by $1.5 million, and all other expenditures were overspent by $1.5 million. Therefore, OSA is reporting $1.5 million in questioned costs. • For grant year 2022, the Department was required to spend a minimum of $9.7 million in direct childcare expenditures, and thus a maximum of $4.2 million in all other expenditures after administrative and quality earmarking requirements; however, the Department only spent $7.5 million. Since grant year 2022 funds were fully expended, the direct childcare earmarking requirement was not met by $2.2 million, and all other expenditures were overspent by $2.2 million. Therefore, OSA is reporting $2.2 million in questioned costs. As a result, OSA is reporting a total of $3.7 million in questioned costs, representative of the direct childcare earmarking discrepancies and resulting amount of all other costs overspent for the 2021 and 2022 grant years. Context: CCDF expenditures reported for: • grant year 2021 totaled $186.5 million, of which $19.2 million was subject to the 70 percent direct childcare spending requirement of $13.4 million. • grant year 2022 totaled $30.9 million, of which $13.9 million was subject to the 70 percent direct childcare spending requirement of $9.7 million. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations for reporting and earmarking Recommendation: We recommend that the Departments enhance existing procedures, including corrections to expenditure tracking processes, and increase supervisory oversight to ensure that all the information reported on quarterly ACF-696 reports is accurate and complete prior to submission to the Federal government. This will also ensure that CCDF earmarking requirements are met. Corrective Action Plan: See F-24 Management’s Response: The Department partially agrees with this finding. The Department and the DHHS Financial Service Center agrees that it could enhance its policies and procedures. The Department disagrees with the questioned costs. The DHHS Financial Service Center will enhance policies and procedures for the CCDF grant by modifying the FSR Reviewer Checklist and add an additional layer of FSR reviewer by April 30, 2025. The DHHS Financial Service Center will collaborate with OCFS to make reporting line determinations by September 1, 2025. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 Auditor’s Concluding Remarks: The Department agrees to the internal control deficiencies and to the noncompliance with Federal reporting and earmarking requirements identified in the Condition, yet does not agree to the resulting questioned costs. Furthermore, the Department does not provide a basis for this disagreement. The total of $3.7 million in questioned costs is representative of the direct childcare earmarking discrepancies and resulting amount of all other costs overspent for the 2021 and 2022 grant years. The overspending on all other costs is deemed unallowable in accordance with the terms of the grant awards, as the funds were required to be spent on direct childcare. The finding remains as stated. (State Number: 24-1114-01)
(2024-059) Title: Internal control over CCDF financial reporting 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: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Matching, level of effort, earmarking Reporting Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.575 $3.7 million Likely Questioned Costs: ALN 93.575 $3.7 million Criteria: 2 CFR 200.303; 45 CFR 98.50 and .65; OMB-0970-0510 ACF-696 Report Instructions The Department must establish 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; all other non-direct services; and • 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. From discretionary amounts provided for a fiscal year, the Department must spend at a minimum 70 percent for direct services after reserving the minimum amount required for quality activities and for 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 four ongoing Federal grant award years during fiscal year 2024, for grant years 2021, 2022, 2023, and 2024. For each grant award: • quarterly CCDF ACF-696 financial status reports are required, and • applicable earmarking requirements for direct childcare subsidies, quality activities, and administrative costs must be met. 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. DHHS SC also monitors CCDF program earmarking requirements as part of this quarterly reporting process. The Office of the State Auditor (OSA) reviewed three quarterly ACF-696 reports and found that: • in all reports reviewed, 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. • the State did not report any non-direct expenditures during fiscal year 2024. The spreadsheet utilized by DHHS SC during the reporting process did not include detailed expenditure information in order to separately report direct and non-direct expenditures. In addition, although administrative and quality earmarking requirements were tracked on DHHS SC’s spreadsheet and during the reporting process, the direct childcare subsidy earmarking requirement was not tracked. Because expenditures were not accurately tracked and therefore reported inaccurately on the ACF-696 reports, calculations of the administrative and direct spending limits were also not accurate. As a result, the requirement that a minimum of 70 percent of expenditures be used for direct childcare subsidies, after administrative and quality earmarking requirements, was not met for the grant year 2021 and 2022 expenditures, as follows: • For grant year 2021, the Department was required to spend a minimum of $13.4 million in direct childcare expenditures, and thus a maximum of $5.8 million in all other expenditures after administrative and quality earmarking requirements; however, the Department only spent $11.9 million in direct childcare expenditures. Since grant year 2021 funds were fully expended, the direct childcare earmarking requirement was not met by $1.5 million, and all other expenditures were overspent by $1.5 million. Therefore, OSA is reporting $1.5 million in questioned costs. • For grant year 2022, the Department was required to spend a minimum of $9.7 million in direct childcare expenditures, and thus a maximum of $4.2 million in all other expenditures after administrative and quality earmarking requirements; however, the Department only spent $7.5 million. Since grant year 2022 funds were fully expended, the direct childcare earmarking requirement was not met by $2.2 million, and all other expenditures were overspent by $2.2 million. Therefore, OSA is reporting $2.2 million in questioned costs. As a result, OSA is reporting a total of $3.7 million in questioned costs, representative of the direct childcare earmarking discrepancies and resulting amount of all other costs overspent for the 2021 and 2022 grant years. Context: CCDF expenditures reported for: • grant year 2021 totaled $186.5 million, of which $19.2 million was subject to the 70 percent direct childcare spending requirement of $13.4 million. • grant year 2022 totaled $30.9 million, of which $13.9 million was subject to the 70 percent direct childcare spending requirement of $9.7 million. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations for reporting and earmarking Recommendation: We recommend that the Departments enhance existing procedures, including corrections to expenditure tracking processes, and increase supervisory oversight to ensure that all the information reported on quarterly ACF-696 reports is accurate and complete prior to submission to the Federal government. This will also ensure that CCDF earmarking requirements are met. Corrective Action Plan: See F-24 Management’s Response: The Department partially agrees with this finding. The Department and the DHHS Financial Service Center agrees that it could enhance its policies and procedures. The Department disagrees with the questioned costs. The DHHS Financial Service Center will enhance policies and procedures for the CCDF grant by modifying the FSR Reviewer Checklist and add an additional layer of FSR reviewer by April 30, 2025. The DHHS Financial Service Center will collaborate with OCFS to make reporting line determinations by September 1, 2025. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 Auditor’s Concluding Remarks: The Department agrees to the internal control deficiencies and to the noncompliance with Federal reporting and earmarking requirements identified in the Condition, yet does not agree to the resulting questioned costs. Furthermore, the Department does not provide a basis for this disagreement. The total of $3.7 million in questioned costs is representative of the direct childcare earmarking discrepancies and resulting amount of all other costs overspent for the 2021 and 2022 grant years. The overspending on all other costs is deemed unallowable in accordance with the terms of the grant awards, as the funds were required to be spent on direct childcare. The finding remains as stated. (State Number: 24-1114-01)
(2024-060) 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 (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Special test 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 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 40 providers subject to health and safety site visits or licensing inspections and identified: • two provider facilities’ annual unannounced site visits did not occur within 12 months as required, and were one month and two months late. • two provider facility inspections were noted in the provider file as complete; however, documentation of completed inspection reports was not maintained in the provider file or posted publicly. OSA selected a non-statistical random sample. Context: The Department provided approximately $29 million to CCDF program childcare providers in fiscal year 2024. 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 required annual childcare provider site visits and licensing inspections, and any resulting corrective action, are documented, monitored, and completed. Corrective Action Plan: See F-25 Management’s Response: The Department agrees with this finding. The Department acknowledges that two facilities annual unannounced inspections did not occur within 12 months. This was related to an unplanned staff resignation and an emergency staff leave of absence. The CLIS management team diligently and conscientiously tracks workloads, engages in regular supervision, team meetings, and has developed tracking systems outside of the antiquated data management system (Macwis) to ensure expectations are met. The Department also agrees with the finding that two facility inspections were not filed properly and were therefore not posted publicly. One staff person was covering two large geographic areas as she transitioned territory and OCFS hired/ trained a new employee. The current process of using paper inspection sheets that are sent to central office for review, scanning, and upload to the consumer education website is cumbersome and presents an opportunity for error. Contact: Janet Whitten, Manager - Children’s Licensing & Investigation, OCFS, DHHS, 207-441-2259 (State Number: 24-1114-02)
(2024-060) 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 (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Special test 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 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 40 providers subject to health and safety site visits or licensing inspections and identified: • two provider facilities’ annual unannounced site visits did not occur within 12 months as required, and were one month and two months late. • two provider facility inspections were noted in the provider file as complete; however, documentation of completed inspection reports was not maintained in the provider file or posted publicly. OSA selected a non-statistical random sample. Context: The Department provided approximately $29 million to CCDF program childcare providers in fiscal year 2024. 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 required annual childcare provider site visits and licensing inspections, and any resulting corrective action, are documented, monitored, and completed. Corrective Action Plan: See F-25 Management’s Response: The Department agrees with this finding. The Department acknowledges that two facilities annual unannounced inspections did not occur within 12 months. This was related to an unplanned staff resignation and an emergency staff leave of absence. The CLIS management team diligently and conscientiously tracks workloads, engages in regular supervision, team meetings, and has developed tracking systems outside of the antiquated data management system (Macwis) to ensure expectations are met. The Department also agrees with the finding that two facility inspections were not filed properly and were therefore not posted publicly. One staff person was covering two large geographic areas as she transitioned territory and OCFS hired/ trained a new employee. The current process of using paper inspection sheets that are sent to central office for review, scanning, and upload to the consumer education website is cumbersome and presents an opportunity for error. Contact: Janet Whitten, Manager - Children’s Licensing & Investigation, OCFS, DHHS, 207-441-2259 (State Number: 24-1114-02)
(2024-060) 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 (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Special test 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 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 40 providers subject to health and safety site visits or licensing inspections and identified: • two provider facilities’ annual unannounced site visits did not occur within 12 months as required, and were one month and two months late. • two provider facility inspections were noted in the provider file as complete; however, documentation of completed inspection reports was not maintained in the provider file or posted publicly. OSA selected a non-statistical random sample. Context: The Department provided approximately $29 million to CCDF program childcare providers in fiscal year 2024. 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 required annual childcare provider site visits and licensing inspections, and any resulting corrective action, are documented, monitored, and completed. Corrective Action Plan: See F-25 Management’s Response: The Department agrees with this finding. The Department acknowledges that two facilities annual unannounced inspections did not occur within 12 months. This was related to an unplanned staff resignation and an emergency staff leave of absence. The CLIS management team diligently and conscientiously tracks workloads, engages in regular supervision, team meetings, and has developed tracking systems outside of the antiquated data management system (Macwis) to ensure expectations are met. The Department also agrees with the finding that two facility inspections were not filed properly and were therefore not posted publicly. One staff person was covering two large geographic areas as she transitioned territory and OCFS hired/ trained a new employee. The current process of using paper inspection sheets that are sent to central office for review, scanning, and upload to the consumer education website is cumbersome and presents an opportunity for error. Contact: Janet Whitten, Manager - Children’s Licensing & Investigation, OCFS, DHHS, 207-441-2259 (State Number: 24-1114-02)
(2024-061) Title: Internal control over CCDF period of performance 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: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.60; American Rescue Plan (ARP) Act, Section 2201(a) The Department must establish 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. Child Care and Development Fund (CCDF) Discretionary liquidation period regulations require the Department to liquidate grant funds within one year of the required obligation date. Section 2201(a) of the ARP Act requires CCDF Discretionary supplemental funds to be obligated in Federal fiscal year 2021 or the succeeding two fiscal years. The Department must obligate supplemental funds by September 30, 2023. 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 utilizes the Department of Health and Human Services’ (DHHS) Service Center to collaboratively process CCDF expenditures, which includes dual review and approval of program grant coding and periods of performance. The Departments are required to ensure expenditures are obligated and liquidated within the required timeframes for each grant. The Office of the State Auditor (OSA) identified 11 significant CCDF expenditure transactions for grants that had obligation and liquidation periods ending during fiscal year 2024. OSA found four payroll transactions charged to CCDF ARP Discretionary supplemental funds totaling $5,321, for payroll costs incurred, and thus obligated, subsequent to the required obligation date; therefore, the costs are deemed unallowable. OSA tested 37 CCDF expenditure adjustments in fiscal year 2024 and found two adjustments totaling $2,952, charged to CCDF ARP Discretionary supplemental funds during the liquidation period that represented expenditures incurred subsequent to the required obligation date; therefore, the costs are deemed unallowable. OSA selected a non-statistical random sample. OSA performed analytical procedures over all fiscal year 2024 expenditure adjustments and found 14 additional adjustments totaling $4,492, all allocated to CCDF ARP Discretionary supplemental funds, for expenditures that were incurred subsequent to the required obligation date; therefore, the costs are deemed unallowable. OCFS’ and DHHS Service Center’s existing review and approval procedures are not adequate, as unallowable costs totaling $12,765 for expenditures outside of the required period of performance were charged to CCDF ARP Discretionary supplemental funds. Context: In fiscal year 2024, the Department expended approximately $52 million in CCDF program funds. Approximately $6 million of total CCDF program expenditures were CCDF ARP Discretionary supplemental funds with a required obligation date of September 30, 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Departments enhance policies and procedures and increase supervisory oversight to ensure that obligations of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-25 Management’s Response: The Department and the DHHS Financial Service Center agree with this finding. The DHHS Financial Service Center will enhance policies and procedures for the CCDF grant by modifying the FSR Reviewer Checklist by April 30, 2025. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 24-1114-03)
(2024-061) Title: Internal control over CCDF period of performance 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: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.60; American Rescue Plan (ARP) Act, Section 2201(a) The Department must establish 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. Child Care and Development Fund (CCDF) Discretionary liquidation period regulations require the Department to liquidate grant funds within one year of the required obligation date. Section 2201(a) of the ARP Act requires CCDF Discretionary supplemental funds to be obligated in Federal fiscal year 2021 or the succeeding two fiscal years. The Department must obligate supplemental funds by September 30, 2023. 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 utilizes the Department of Health and Human Services’ (DHHS) Service Center to collaboratively process CCDF expenditures, which includes dual review and approval of program grant coding and periods of performance. The Departments are required to ensure expenditures are obligated and liquidated within the required timeframes for each grant. The Office of the State Auditor (OSA) identified 11 significant CCDF expenditure transactions for grants that had obligation and liquidation periods ending during fiscal year 2024. OSA found four payroll transactions charged to CCDF ARP Discretionary supplemental funds totaling $5,321, for payroll costs incurred, and thus obligated, subsequent to the required obligation date; therefore, the costs are deemed unallowable. OSA tested 37 CCDF expenditure adjustments in fiscal year 2024 and found two adjustments totaling $2,952, charged to CCDF ARP Discretionary supplemental funds during the liquidation period that represented expenditures incurred subsequent to the required obligation date; therefore, the costs are deemed unallowable. OSA selected a non-statistical random sample. OSA performed analytical procedures over all fiscal year 2024 expenditure adjustments and found 14 additional adjustments totaling $4,492, all allocated to CCDF ARP Discretionary supplemental funds, for expenditures that were incurred subsequent to the required obligation date; therefore, the costs are deemed unallowable. OCFS’ and DHHS Service Center’s existing review and approval procedures are not adequate, as unallowable costs totaling $12,765 for expenditures outside of the required period of performance were charged to CCDF ARP Discretionary supplemental funds. Context: In fiscal year 2024, the Department expended approximately $52 million in CCDF program funds. Approximately $6 million of total CCDF program expenditures were CCDF ARP Discretionary supplemental funds with a required obligation date of September 30, 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Departments enhance policies and procedures and increase supervisory oversight to ensure that obligations of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-25 Management’s Response: The Department and the DHHS Financial Service Center agree with this finding. The DHHS Financial Service Center will enhance policies and procedures for the CCDF grant by modifying the FSR Reviewer Checklist by April 30, 2025. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 24-1114-03)
(2024-063) Title: Internal control over the Foster Care – Title IV-E and 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: Foster Care – Title IV-E (COVID-19) Adoption Assistance – Title IV-E (COVID-19) Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.658 $4,647 ALN 93.659 $9,367 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during the fiscal year and identified known questioned costs associated with seven 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 The Department must establish 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 five 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. Condition: The Office of Child and Family Services (OCFS) administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State, 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 to assist with the care of the eligible child on an ongoing basis. A financial resources specialist (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 client eligibility determinations and found: • three determination checklists did not include a certification decision; • three determination checklists were signed by a FRS who did not perform the eligibility determination; and • one determination checklist did not initially include a certification decision. The determination checklist was signed subsequent to OSA’s request for review by a FRS who did not perform the eligibility determination. Additionally, one client’s prospective foster parent did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671. A second family was residing in the Resource Family Home (RFH), and child abuse and neglect registry checks were not completed or satisfactorily met for the additional adults. Additionally, the Home Study to evaluate the home and safety environment related to the RFH license for the family was completed without disclosing all individuals residing in the home. Upon further review, OSA determined two additional clients were in custody of the RFH and receiving Foster Care or Adoption Assistance benefits during fiscal year 2024. The RFH received $10,701 in benefits from both Federal programs on behalf of three clients, resulting in questioned costs of the entire amount. OSA tested 60 clients and 60 benefit payments and found: • one client received Foster Care childcare benefits after the date the client was adopted, resulting in questioned costs of $1,338. • one client received Foster Care benefit payments while in an unlicensed placement for one month, resulting in questioned costs of $783. • one client determined to be ineligible continued to receive Foster Care benefit payments during the fiscal year, resulting in questioned costs of $594. • one client changed placements during the fiscal year and two separate Foster Family Homes received benefit payments for the same time period on behalf of the client, resulting in questioned costs of $529. The Department recorded the overpayments in the child welfare information system but did not recoup the funds during the fiscal year. • one client received Foster Care benefit payments during the same time period that they received Adoption Assistance benefit payments, resulting in questioned costs of $69 to the RFH. • benefits for one client were paid with State funds and should have been paid with Federal funds for five months of the fiscal year. • one client’s eligibility record included an incorrect end date for benefits within the child welfare information system, resulting in the client being paid with State funds instead of claiming Federal funds for three months of the fiscal year. OSA selected non-statistical random samples. Context: In fiscal year 2024, the State provided approximately: • 900 Foster Care clients with $5.4 million in Federal benefits; and • 4,200 Adoption Assistance clients with $24.7 million in Federal benefits. Cause: • Lack of appropriate oversight over eligibility and benefit determinations • Lack of adequate policies and procedures and supervisory oversight of the child welfare information system. The system was implemented in fiscal year 2023 and policies and procedures were not designed to properly test system coding for all eligibility change circumstances that could occur. 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: • enhance policies and procedures to ensure that eligibility determination checklists include certification decisions by the FRS completing the determination; • 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-26 Management’s Response: The Department partially agrees with this finding. OCFS agrees with the finding in that the checklist was not appropriately signed at the time of completion. OCFS would like to note that the checklist is not part of any state or federal policy or requirement. It is our own internal process and was only added to our FRS manual as a plan of correction (POC) because of last year’s finding re: some checklists not being signed. When an FRS worker completes an Initial determination in the system, the determination is printed out for our files and the document includes a timestamp when it was completed as well as the FRS assigned. Due to this POC just being added last year, this would be expected to be an ongoing finding for the foreseeable future since we cannot retroactively sign the completed checklists in the past. OCFS agrees there is a need to formalize the overpayment collection process. We believe that there are both programmatic and technical solutions to be explored. OCFS will develop a workgroup of subject matter experts to explore and understand the challenges of managing overpayments and develop a solution for implementation over the next year. OCFS disagrees with the finding that OCFS needs to strengthen its licensing practices for background screening of Resource Families. The finding is based on additional occupants in the home that were not subject to background checks and were not listed in the renewal home study completed in 2023. The home study referenced above described the home and all occupants as presented by the family. The Community Care Worker completed a safety inspection/walk through of the home and found no evidence of additional occupants. OCFS conducts background checks on the adults in the home in accordance with policy and rules, at initial licensure as well as renewal of licensure every two years. OCFS does not conduct unannounced licensing visits and relies on resource families to report changes in family composition and occupancy. In the event there are not any children in the custody of the state in the home, OCFS would not have reason or cause to inspect who is residing in the home or conduct face-to-face visits with resource families. Because this specific finding does not describe a failure to adhere to policy and rules, no correction action plan will be identified. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 Auditor’s Concluding Remarks: For the exceptions identified over the eligibility determination checklists, the use of the checklist was identified to OSA by the Department as the established control to ensure compliance over determinations of Title IV-E eligibility for all clients entering Foster Care. While there is no Federal requirement for a checklist, the Department is required to establish and maintain internal controls over Federal awards in accordance with 2 CFR 200.303. OSA performed testing over the Department’s established internal control. Regarding the need to strengthen its licensing practices for background screening of Resource Families, the child welfare information system listed the additional occupants residing in the home as early as 2020, including within several family investigations and reports of alleged abuse occurring in the home. While OSA recognizes that OCFS does not conduct unannounced licensing visits, the information surrounding resource families is obtainable through review of the child welfare information system. A cross-check of associated intakes, cases, family investigations, or reports of alleged abuse within the child welfare information system would have identified the second family residing in the home. The adults residing in the home did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671, and the RFH remained licensed and continued to inappropriately receive Title IV-E benefits. Therefore, this finding does describe a failure to adhere to policy and rules, and a corrective action plan is necessary. The finding remains as stated. (State Number: 24-1109-01)
(2024-063) Title: Internal control over the Foster Care – Title IV-E and 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: Foster Care – Title IV-E (COVID-19) Adoption Assistance – Title IV-E (COVID-19) Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.658 $4,647 ALN 93.659 $9,367 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during the fiscal year and identified known questioned costs associated with seven 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 The Department must establish 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 five 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. Condition: The Office of Child and Family Services (OCFS) administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State, 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 to assist with the care of the eligible child on an ongoing basis. A financial resources specialist (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 client eligibility determinations and found: • three determination checklists did not include a certification decision; • three determination checklists were signed by a FRS who did not perform the eligibility determination; and • one determination checklist did not initially include a certification decision. The determination checklist was signed subsequent to OSA’s request for review by a FRS who did not perform the eligibility determination. Additionally, one client’s prospective foster parent did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671. A second family was residing in the Resource Family Home (RFH), and child abuse and neglect registry checks were not completed or satisfactorily met for the additional adults. Additionally, the Home Study to evaluate the home and safety environment related to the RFH license for the family was completed without disclosing all individuals residing in the home. Upon further review, OSA determined two additional clients were in custody of the RFH and receiving Foster Care or Adoption Assistance benefits during fiscal year 2024. The RFH received $10,701 in benefits from both Federal programs on behalf of three clients, resulting in questioned costs of the entire amount. OSA tested 60 clients and 60 benefit payments and found: • one client received Foster Care childcare benefits after the date the client was adopted, resulting in questioned costs of $1,338. • one client received Foster Care benefit payments while in an unlicensed placement for one month, resulting in questioned costs of $783. • one client determined to be ineligible continued to receive Foster Care benefit payments during the fiscal year, resulting in questioned costs of $594. • one client changed placements during the fiscal year and two separate Foster Family Homes received benefit payments for the same time period on behalf of the client, resulting in questioned costs of $529. The Department recorded the overpayments in the child welfare information system but did not recoup the funds during the fiscal year. • one client received Foster Care benefit payments during the same time period that they received Adoption Assistance benefit payments, resulting in questioned costs of $69 to the RFH. • benefits for one client were paid with State funds and should have been paid with Federal funds for five months of the fiscal year. • one client’s eligibility record included an incorrect end date for benefits within the child welfare information system, resulting in the client being paid with State funds instead of claiming Federal funds for three months of the fiscal year. OSA selected non-statistical random samples. Context: In fiscal year 2024, the State provided approximately: • 900 Foster Care clients with $5.4 million in Federal benefits; and • 4,200 Adoption Assistance clients with $24.7 million in Federal benefits. Cause: • Lack of appropriate oversight over eligibility and benefit determinations • Lack of adequate policies and procedures and supervisory oversight of the child welfare information system. The system was implemented in fiscal year 2023 and policies and procedures were not designed to properly test system coding for all eligibility change circumstances that could occur. 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: • enhance policies and procedures to ensure that eligibility determination checklists include certification decisions by the FRS completing the determination; • 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-26 Management’s Response: The Department partially agrees with this finding. OCFS agrees with the finding in that the checklist was not appropriately signed at the time of completion. OCFS would like to note that the checklist is not part of any state or federal policy or requirement. It is our own internal process and was only added to our FRS manual as a plan of correction (POC) because of last year’s finding re: some checklists not being signed. When an FRS worker completes an Initial determination in the system, the determination is printed out for our files and the document includes a timestamp when it was completed as well as the FRS assigned. Due to this POC just being added last year, this would be expected to be an ongoing finding for the foreseeable future since we cannot retroactively sign the completed checklists in the past. OCFS agrees there is a need to formalize the overpayment collection process. We believe that there are both programmatic and technical solutions to be explored. OCFS will develop a workgroup of subject matter experts to explore and understand the challenges of managing overpayments and develop a solution for implementation over the next year. OCFS disagrees with the finding that OCFS needs to strengthen its licensing practices for background screening of Resource Families. The finding is based on additional occupants in the home that were not subject to background checks and were not listed in the renewal home study completed in 2023. The home study referenced above described the home and all occupants as presented by the family. The Community Care Worker completed a safety inspection/walk through of the home and found no evidence of additional occupants. OCFS conducts background checks on the adults in the home in accordance with policy and rules, at initial licensure as well as renewal of licensure every two years. OCFS does not conduct unannounced licensing visits and relies on resource families to report changes in family composition and occupancy. In the event there are not any children in the custody of the state in the home, OCFS would not have reason or cause to inspect who is residing in the home or conduct face-to-face visits with resource families. Because this specific finding does not describe a failure to adhere to policy and rules, no correction action plan will be identified. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 Auditor’s Concluding Remarks: For the exceptions identified over the eligibility determination checklists, the use of the checklist was identified to OSA by the Department as the established control to ensure compliance over determinations of Title IV-E eligibility for all clients entering Foster Care. While there is no Federal requirement for a checklist, the Department is required to establish and maintain internal controls over Federal awards in accordance with 2 CFR 200.303. OSA performed testing over the Department’s established internal control. Regarding the need to strengthen its licensing practices for background screening of Resource Families, the child welfare information system listed the additional occupants residing in the home as early as 2020, including within several family investigations and reports of alleged abuse occurring in the home. While OSA recognizes that OCFS does not conduct unannounced licensing visits, the information surrounding resource families is obtainable through review of the child welfare information system. A cross-check of associated intakes, cases, family investigations, or reports of alleged abuse within the child welfare information system would have identified the second family residing in the home. The adults residing in the home did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671, and the RFH remained licensed and continued to inappropriately receive Title IV-E benefits. Therefore, this finding does describe a failure to adhere to policy and rules, and a corrective action plan is necessary. The finding remains as stated. (State Number: 24-1109-01)
(2024-064) 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 (COVID-19) Assistance Listing Number: 93.659 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.659 $10,860 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 2024 and identified known questioned costs for three clients based on review of Adoption Agreements signed in 2008, 2012, and 2016. Since each Adoption Agreement 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 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: • one client received Social Security Administration benefits, and therefore, was not eligible for Adoption Assistance benefits. The client received a daily Adoption Assistance rate of $16.50, resulting in questioned costs of $6,023 during fiscal year 2024. • one client received a higher daily Adoption Assistance rate than what they qualified for under the Foster Care – Title IV-E program. The client received a $26.25 daily rate instead of $16.50, resulting in questioned costs of $3,559 during fiscal year 2024. • one client received a higher daily Adoption Assistance rate than what they qualified for under the Foster Care – Title IV-E program. The client received a $20 daily rate instead of $16.50, resulting in questioned costs of $1,278 during fiscal year 2024. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the State provided approximately 4,200 Adoption Assistance clients with $24.7 million in Federal benefits. Cause: Lack of adequate policies and procedures over verification and accuracy of benefit determinations and associated Adoption Assistance payments Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • Individuals not eligible for services could receive benefits. Recommendation: We recommend that the Department enhance policies and procedures 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-26 Management’s Response: The Department agrees with this finding. Completion of the Adoption Assistance Checklist has not been universally understood to be used as the internal control for documentation of certification decisions, but as a guide for staff to use in preparing and organizing the Application for Adoption Assistance Packets. We agree that this is an effective tool to ensure certification decisions regarding IVE and consistent documentation in case files. Contact: Karen Benson, Adoption Program Manager, OCFS, DHHS, 207-561-4208 (State Number: 24-1110-01)
(2024-065) Title: Internal control over the Foster Care – Title IV-E and Adoption Assistance – Title IV-E programs FMAP rates 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 (COVID-19) Adoption Assistance – Title IV-E (COVID-19) Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Matching, level of effort, earmarking Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 1356.21, .40, and .60; Public Law No. 117-328, Section 5131 of Division FF of the Consolidated Appropriations Act, 2023 The Department must establish 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 eligible 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. 45 CFR 1356.60 outlines the matching percentage of Title IV-E funding in Adoption Assistance subsidy payments and is based on the Federal Medical Assistance Program (FMAP) percentage. As a result of the COVID-19 public health emergency, the U.S. Department of Health and Human Services granted a temporary increase to the FMAP rate that is used in determining the Federal share of expenditures for assistance payments under the Title IV-E Foster Care and Adoption Assistance programs. This was permitted for each calendar quarter occurring during the period beginning on January 1, 2020. Under the Consolidated Appropriations Act enacted on December 29, 2022, the enhanced FMAP rate was required to be phased out and end completely on December 31, 2023. Condition: The Office of Child and Family Services (OCFS) administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State, 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 to assist with the care of the eligible child on an ongoing basis. The State is allowed to pay a portion of the Foster Care and Adoption Assistance maintenance payments and claim Federal financial participation for eligible clients. The FMAP rate is programmed into the child welfare information system by OCFS to apply the correct allocation between Federal and State funds to each transaction for eligible Foster Care and Adoption Assistance eligible clients. The Department of Health and Human Services’ Service Center (DHHS SC) submits quarterly financial reports that detail the allocation between Federal and State funds, based on the FMAP programmed into the report template obtained from the Federal agency. When discrepancies are identified, DHHS SC will correct the fund allocation in the State’s accounting system and report the benefit amounts using the correct FMAP rates. The Office of the State Auditor (OSA) tested 60 Foster Care benefit payments and 60 Adoption Assistance benefit payments and found that OCFS program personnel did not reduce the FMAP rate from January 1, 2024, through May 3, 2024. For 17 Foster Care and 29 Adoption Assistance benefit payments, OCFS continued to claim the enhanced rate of 64.15 percent for both programs, instead of the required 62.65 percent rate. While the incorrect rate was applied to individual client benefit payments, DHHS SC reported the correct FMAP rate and Federal participation amounts in the quarterly financial reports and drew Federal funds based on the correct FMAP rate for that period. DHHS SC and OCFS did not confirm that the correct rates were applied within the child welfare information system. OSA selected non-statistical random samples. Context: In fiscal year 2024, the State provided approximately: • 900 Foster Care clients with $5.4 million in Federal benefits; and • 4,200 Adoption Assistance clients with $24.7 million in Federal benefits. Cause: Lack of central oversight over communication of FMAP rate changes between DHHS SC and OCFS personnel Effect: • Inaccurate Federal and State allocation for client benefit payments within the child welfare information system, resulting in discrepancies between the State’s accounting system and the child welfare information system. • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Departments enhance policies and procedures to ensure the appropriate FMAP rates are communicated and entered into the child welfare information system accurately and timely. This will ensure that client benefit information is accurately reflected in the child welfare information system and agrees to the client benefit amounts in the State’s accounting system. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. OCFS agrees there was a failure in the timely communication process of the step down FMAP rate to OCFS. OCFS has developed and will implement a corrective action plan to address the issue identified. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 (State Number: 24-1110-02)
(2024-065) Title: Internal control over the Foster Care – Title IV-E and Adoption Assistance – Title IV-E programs FMAP rates 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 (COVID-19) Adoption Assistance – Title IV-E (COVID-19) Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Matching, level of effort, earmarking Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 1356.21, .40, and .60; Public Law No. 117-328, Section 5131 of Division FF of the Consolidated Appropriations Act, 2023 The Department must establish 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 eligible 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. 45 CFR 1356.60 outlines the matching percentage of Title IV-E funding in Adoption Assistance subsidy payments and is based on the Federal Medical Assistance Program (FMAP) percentage. As a result of the COVID-19 public health emergency, the U.S. Department of Health and Human Services granted a temporary increase to the FMAP rate that is used in determining the Federal share of expenditures for assistance payments under the Title IV-E Foster Care and Adoption Assistance programs. This was permitted for each calendar quarter occurring during the period beginning on January 1, 2020. Under the Consolidated Appropriations Act enacted on December 29, 2022, the enhanced FMAP rate was required to be phased out and end completely on December 31, 2023. Condition: The Office of Child and Family Services (OCFS) administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State, 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 to assist with the care of the eligible child on an ongoing basis. The State is allowed to pay a portion of the Foster Care and Adoption Assistance maintenance payments and claim Federal financial participation for eligible clients. The FMAP rate is programmed into the child welfare information system by OCFS to apply the correct allocation between Federal and State funds to each transaction for eligible Foster Care and Adoption Assistance eligible clients. The Department of Health and Human Services’ Service Center (DHHS SC) submits quarterly financial reports that detail the allocation between Federal and State funds, based on the FMAP programmed into the report template obtained from the Federal agency. When discrepancies are identified, DHHS SC will correct the fund allocation in the State’s accounting system and report the benefit amounts using the correct FMAP rates. The Office of the State Auditor (OSA) tested 60 Foster Care benefit payments and 60 Adoption Assistance benefit payments and found that OCFS program personnel did not reduce the FMAP rate from January 1, 2024, through May 3, 2024. For 17 Foster Care and 29 Adoption Assistance benefit payments, OCFS continued to claim the enhanced rate of 64.15 percent for both programs, instead of the required 62.65 percent rate. While the incorrect rate was applied to individual client benefit payments, DHHS SC reported the correct FMAP rate and Federal participation amounts in the quarterly financial reports and drew Federal funds based on the correct FMAP rate for that period. DHHS SC and OCFS did not confirm that the correct rates were applied within the child welfare information system. OSA selected non-statistical random samples. Context: In fiscal year 2024, the State provided approximately: • 900 Foster Care clients with $5.4 million in Federal benefits; and • 4,200 Adoption Assistance clients with $24.7 million in Federal benefits. Cause: Lack of central oversight over communication of FMAP rate changes between DHHS SC and OCFS personnel Effect: • Inaccurate Federal and State allocation for client benefit payments within the child welfare information system, resulting in discrepancies between the State’s accounting system and the child welfare information system. • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Departments enhance policies and procedures to ensure the appropriate FMAP rates are communicated and entered into the child welfare information system accurately and timely. This will ensure that client benefit information is accurately reflected in the child welfare information system and agrees to the client benefit amounts in the State’s accounting system. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. OCFS agrees there was a failure in the timely communication process of the step down FMAP rate to OCFS. OCFS has developed and will implement a corrective action plan to address the issue identified. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 (State Number: 24-1110-02)
(2024-067) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 2024 was 89. Of those 89 uniform desk reviews, none were completed at the time of audit testing in September 2024. Context: The Department: • provided $262.6 million in Federal Medicaid funding and $107.6 million in State Medicaid funding to NFs during fiscal year 2024. • completed 69 NF uniform desk reviews related to prior fiscal years in fiscal year 2024. 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-27 Management’s Response: The Department agrees with this finding and cause. The lack of resources is the result of high vacancy rates (30%) for the Division of Audit and staff working on reviews of COVID funding. The Division of Audit has completed the reviews required for COVID funding and will be redirecting staff to work on the Medicaid audits. The Division of Audit is working to fill all vacant positions, so resources are available for these audits. Lastly, the Department has implemented a new reimbursement methodology for Nursing Facilities which will reduce the amount of audit testing required. Contact: Herb Downs, Director, Division of Audit, DHHS, 207-287-2778 (State Number: 24-1106-01)
(2024-067) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 2024 was 89. Of those 89 uniform desk reviews, none were completed at the time of audit testing in September 2024. Context: The Department: • provided $262.6 million in Federal Medicaid funding and $107.6 million in State Medicaid funding to NFs during fiscal year 2024. • completed 69 NF uniform desk reviews related to prior fiscal years in fiscal year 2024. 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-27 Management’s Response: The Department agrees with this finding and cause. The lack of resources is the result of high vacancy rates (30%) for the Division of Audit and staff working on reviews of COVID funding. The Division of Audit has completed the reviews required for COVID funding and will be redirecting staff to work on the Medicaid audits. The Division of Audit is working to fill all vacant positions, so resources are available for these audits. Lastly, the Department has implemented a new reimbursement methodology for Nursing Facilities which will reduce the amount of audit testing required. Contact: Herb Downs, Director, Division of Audit, DHHS, 207-287-2778 (State Number: 24-1106-01)
(2024-067) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 2024 was 89. Of those 89 uniform desk reviews, none were completed at the time of audit testing in September 2024. Context: The Department: • provided $262.6 million in Federal Medicaid funding and $107.6 million in State Medicaid funding to NFs during fiscal year 2024. • completed 69 NF uniform desk reviews related to prior fiscal years in fiscal year 2024. 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-27 Management’s Response: The Department agrees with this finding and cause. The lack of resources is the result of high vacancy rates (30%) for the Division of Audit and staff working on reviews of COVID funding. The Division of Audit has completed the reviews required for COVID funding and will be redirecting staff to work on the Medicaid audits. The Division of Audit is working to fill all vacant positions, so resources are available for these audits. Lastly, the Department has implemented a new reimbursement methodology for Nursing Facilities which will reduce the amount of audit testing required. Contact: Herb Downs, Director, Division of Audit, DHHS, 207-287-2778 (State Number: 24-1106-01)
(2024-067) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 2024 was 89. Of those 89 uniform desk reviews, none were completed at the time of audit testing in September 2024. Context: The Department: • provided $262.6 million in Federal Medicaid funding and $107.6 million in State Medicaid funding to NFs during fiscal year 2024. • completed 69 NF uniform desk reviews related to prior fiscal years in fiscal year 2024. 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-27 Management’s Response: The Department agrees with this finding and cause. The lack of resources is the result of high vacancy rates (30%) for the Division of Audit and staff working on reviews of COVID funding. The Division of Audit has completed the reviews required for COVID funding and will be redirecting staff to work on the Medicaid audits. The Division of Audit is working to fill all vacant positions, so resources are available for these audits. Lastly, the Department has implemented a new reimbursement methodology for Nursing Facilities which will reduce the amount of audit testing required. Contact: Herb Downs, Director, Division of Audit, DHHS, 207-287-2778 (State Number: 24-1106-01)
(2024-068) Title: Internal control over Medicare Part B premium 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: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 42 CFR 431.625 The Department must establish 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. 42 CFR 431.625 outlines eligibility criteria which, if met, allows the State to pay a portion of the Federal Medicare Part B premium on behalf of the client and claim Federal financial participation in the payment. Clients may be deemed eligible by the Federal government as indicated by a Federal Buy-In code, or by the State as indicated by eligibility status in the Automated Client Eligibility System (ACES). Condition: The Department receives monthly invoices from the Centers for Medicare and Medicaid Services (CMS) for Medicare Part B premiums. CMS provides a separate detailed listing of transactions relating to the status of Medicaid clients’ Medicare Part B (Buy-In) eligibility that the Office for Family Independence (OFI) Data Team utilizes to produce the Monthly Buy-In Report. OFI eligibility personnel use the Monthly Buy-In Report to reconcile Buy-In actions taken by and between CMS and ACES to ensure Medicare Part B payments are made only to those deemed eligible. The OFI Data Team produced 12 Monthly Buy-In Reports throughout fiscal year 2024. The Department could not provide documentation that reports were reviewed or corrective action was taken for seven months of potential discrepancies. Context: In fiscal year 2024, approximately $123 million in Federal funds and $70 million in State funds were paid to CMS for Medicare Part B premiums. Cause: • Lack of resources • Lack of supervisory oversight Effect: • Potential Medicare Part B premiums paid by the State for ineligible clients • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement oversight procedures to ensure that Monthly Buy-In Reports are reviewed, corrective action is implemented if required, and documentation is retained. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. There has been marked improvement in our results reviewing and acting on these reports since our MaineCare Program Integrity team became fully staffed in March 2024. We intend to review our processes further and regularly to ensure satisfaction of the requirement. The Department provided documentation to support that review and corrective actions were completed for five of the twelve months. Documentation could not be provided to support full review for seven months. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 24-1106-03)
(2024-068) Title: Internal control over Medicare Part B premium 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: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 42 CFR 431.625 The Department must establish 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. 42 CFR 431.625 outlines eligibility criteria which, if met, allows the State to pay a portion of the Federal Medicare Part B premium on behalf of the client and claim Federal financial participation in the payment. Clients may be deemed eligible by the Federal government as indicated by a Federal Buy-In code, or by the State as indicated by eligibility status in the Automated Client Eligibility System (ACES). Condition: The Department receives monthly invoices from the Centers for Medicare and Medicaid Services (CMS) for Medicare Part B premiums. CMS provides a separate detailed listing of transactions relating to the status of Medicaid clients’ Medicare Part B (Buy-In) eligibility that the Office for Family Independence (OFI) Data Team utilizes to produce the Monthly Buy-In Report. OFI eligibility personnel use the Monthly Buy-In Report to reconcile Buy-In actions taken by and between CMS and ACES to ensure Medicare Part B payments are made only to those deemed eligible. The OFI Data Team produced 12 Monthly Buy-In Reports throughout fiscal year 2024. The Department could not provide documentation that reports were reviewed or corrective action was taken for seven months of potential discrepancies. Context: In fiscal year 2024, approximately $123 million in Federal funds and $70 million in State funds were paid to CMS for Medicare Part B premiums. Cause: • Lack of resources • Lack of supervisory oversight Effect: • Potential Medicare Part B premiums paid by the State for ineligible clients • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement oversight procedures to ensure that Monthly Buy-In Reports are reviewed, corrective action is implemented if required, and documentation is retained. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. There has been marked improvement in our results reviewing and acting on these reports since our MaineCare Program Integrity team became fully staffed in March 2024. We intend to review our processes further and regularly to ensure satisfaction of the requirement. The Department provided documentation to support that review and corrective actions were completed for five of the twelve months. Documentation could not be provided to support full review for seven months. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 24-1106-03)
(2024-068) Title: Internal control over Medicare Part B premium 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: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 42 CFR 431.625 The Department must establish 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. 42 CFR 431.625 outlines eligibility criteria which, if met, allows the State to pay a portion of the Federal Medicare Part B premium on behalf of the client and claim Federal financial participation in the payment. Clients may be deemed eligible by the Federal government as indicated by a Federal Buy-In code, or by the State as indicated by eligibility status in the Automated Client Eligibility System (ACES). Condition: The Department receives monthly invoices from the Centers for Medicare and Medicaid Services (CMS) for Medicare Part B premiums. CMS provides a separate detailed listing of transactions relating to the status of Medicaid clients’ Medicare Part B (Buy-In) eligibility that the Office for Family Independence (OFI) Data Team utilizes to produce the Monthly Buy-In Report. OFI eligibility personnel use the Monthly Buy-In Report to reconcile Buy-In actions taken by and between CMS and ACES to ensure Medicare Part B payments are made only to those deemed eligible. The OFI Data Team produced 12 Monthly Buy-In Reports throughout fiscal year 2024. The Department could not provide documentation that reports were reviewed or corrective action was taken for seven months of potential discrepancies. Context: In fiscal year 2024, approximately $123 million in Federal funds and $70 million in State funds were paid to CMS for Medicare Part B premiums. Cause: • Lack of resources • Lack of supervisory oversight Effect: • Potential Medicare Part B premiums paid by the State for ineligible clients • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement oversight procedures to ensure that Monthly Buy-In Reports are reviewed, corrective action is implemented if required, and documentation is retained. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. There has been marked improvement in our results reviewing and acting on these reports since our MaineCare Program Integrity team became fully staffed in March 2024. We intend to review our processes further and regularly to ensure satisfaction of the requirement. The Department provided documentation to support that review and corrective actions were completed for five of the twelve months. Documentation could not be provided to support full review for seven months. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 24-1106-03)
(2024-068) Title: Internal control over Medicare Part B premium 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: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 42 CFR 431.625 The Department must establish 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. 42 CFR 431.625 outlines eligibility criteria which, if met, allows the State to pay a portion of the Federal Medicare Part B premium on behalf of the client and claim Federal financial participation in the payment. Clients may be deemed eligible by the Federal government as indicated by a Federal Buy-In code, or by the State as indicated by eligibility status in the Automated Client Eligibility System (ACES). Condition: The Department receives monthly invoices from the Centers for Medicare and Medicaid Services (CMS) for Medicare Part B premiums. CMS provides a separate detailed listing of transactions relating to the status of Medicaid clients’ Medicare Part B (Buy-In) eligibility that the Office for Family Independence (OFI) Data Team utilizes to produce the Monthly Buy-In Report. OFI eligibility personnel use the Monthly Buy-In Report to reconcile Buy-In actions taken by and between CMS and ACES to ensure Medicare Part B payments are made only to those deemed eligible. The OFI Data Team produced 12 Monthly Buy-In Reports throughout fiscal year 2024. The Department could not provide documentation that reports were reviewed or corrective action was taken for seven months of potential discrepancies. Context: In fiscal year 2024, approximately $123 million in Federal funds and $70 million in State funds were paid to CMS for Medicare Part B premiums. Cause: • Lack of resources • Lack of supervisory oversight Effect: • Potential Medicare Part B premiums paid by the State for ineligible clients • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement oversight procedures to ensure that Monthly Buy-In Reports are reviewed, corrective action is implemented if required, and documentation is retained. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. There has been marked improvement in our results reviewing and acting on these reports since our MaineCare Program Integrity team became fully staffed in March 2024. We intend to review our processes further and regularly to ensure satisfaction of the requirement. The Department provided documentation to support that review and corrective actions were completed for five of the twelve months. Documentation could not be provided to support full review for seven months. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 24-1106-03)
(2024-069) Title: Internal control over Medicaid cost of care assessments and deductions needs improvement Prior Year Findings: See scheduleof Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 42 CFR 435.725; MaineCare Eligibility Manual, Part 14, Section 6 The Department must establish 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 reduce its payment to an institution for services provided to an individual by the amount that remains after deducting certain amounts from the member’s total income. This remaining amount is the member’s maximum share of the cost, known as cost of care (COC). Condition: A COC assessment represents the required contribution that a MaineCare recipient must pay toward care in a Long Term Care Facility (LTCF). The Office for Family Independence (OFI) is responsible for COC assessments for all Medicaid members in the State. COC assessments are either calculated by the Automated Client Eligibility System or calculated manually by eligibility specialists. System-generated COC assessments are not subject to secondary review. A COC deduction represents the amount of assessment that was deducted from a paid claim. Members may have an assessment calculated but may never have a claim with a deduction utilizing that assessment. The Office of MaineCare Services (OMS) is responsible for applying assessments to submitted claims prior to payment. The Office of the State Auditor (OSA) tested 60 COC assessments and related deductions from paid claims. OSA identified: • one COC assessment was not calculated correctly or retroactively adjusted. The COC was higher than it should have been by $10. The assessment was $1,099 and should have been $1,089 for six months during the fiscal year. This member had six claims where the incorrect COC was applied. • one COC deduction was not deducted correctly from the paid claim. The COC deducted was lower than it should have been by $22. The assessment was $1,713 for two months during the fiscal year and the amount that was deducted was $1,691. This member had two claims where the incorrect COC deduction was applied. OSA selected a non-statistical random sample. Context: In fiscal year 2024, approximately: • 18,000 COC assessments were calculated by OFI; • 8,500 members had COC assessments; and • $627 million was paid to LTCFs. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure COC assessments are calculated correctly • Lack of adequate procedures to ensure system exception reports are complete and accurate Effect: • Inaccurate COC assessments, deductions, and retroactive changes may result in overpayments or underpayments for members or the State. • Potential questioned costs and disallowances Recommendation: We recommend that: • OFI enhance oversight procedures to ensure that COC assessments are calculated and deducted correctly. • OMS collaborate with OFI to ensure that system exception reports capture all COC-related claims which require adjustments. Corrective Action Plan: See F-28 Management’s Response: The Department partially agrees with this finding. The Department agrees with the two exceptions found by the Office of the State Auditor. However, we believe that the Department has reasonable assurance with the controls in place that results in a 97% compliance with the COC calculations, which has not decreased from previous findings. No corrective action is necessary as a result of an error rate of only 3%. The Department will continue to actively manage and monitor the Cost of Care system in compliance with federal regulations. In response to the first of two errors identified by OSA, OMS will request an update to an existing Cost of Care report supplied by a third-party vendor. Changes to cost of care are contained in the Retroactive Cost of Care Report, however if there is a second determination of cost of care in a month and the result is identical to the first change in the month, neither is included in the report. This is an error in the report logic that must be corrected. A Change Request will be created to modify and correct the report so that the latest change in the month will be reported to be acted on by OMS. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Department agrees with the exceptions identified in the Condition. The Department’s disagreement is derived from the three percent sample payment error rate. The Department asserts that the error rate is acceptable and thus, no corrective action is necessary; however, for the two exceptions OSA identified, existing control procedures resulted in inaccurate claim payments. While OSA recognizes that achieving 100 percent accuracy in calculating COC assessments and applying COC deductions would likely not be feasible, the identified control deficiencies indicate that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 24-1106-05)
(2024-069) Title: Internal control over Medicaid cost of care assessments and deductions needs improvement Prior Year Findings: See scheduleof Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 42 CFR 435.725; MaineCare Eligibility Manual, Part 14, Section 6 The Department must establish 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 reduce its payment to an institution for services provided to an individual by the amount that remains after deducting certain amounts from the member’s total income. This remaining amount is the member’s maximum share of the cost, known as cost of care (COC). Condition: A COC assessment represents the required contribution that a MaineCare recipient must pay toward care in a Long Term Care Facility (LTCF). The Office for Family Independence (OFI) is responsible for COC assessments for all Medicaid members in the State. COC assessments are either calculated by the Automated Client Eligibility System or calculated manually by eligibility specialists. System-generated COC assessments are not subject to secondary review. A COC deduction represents the amount of assessment that was deducted from a paid claim. Members may have an assessment calculated but may never have a claim with a deduction utilizing that assessment. The Office of MaineCare Services (OMS) is responsible for applying assessments to submitted claims prior to payment. The Office of the State Auditor (OSA) tested 60 COC assessments and related deductions from paid claims. OSA identified: • one COC assessment was not calculated correctly or retroactively adjusted. The COC was higher than it should have been by $10. The assessment was $1,099 and should have been $1,089 for six months during the fiscal year. This member had six claims where the incorrect COC was applied. • one COC deduction was not deducted correctly from the paid claim. The COC deducted was lower than it should have been by $22. The assessment was $1,713 for two months during the fiscal year and the amount that was deducted was $1,691. This member had two claims where the incorrect COC deduction was applied. OSA selected a non-statistical random sample. Context: In fiscal year 2024, approximately: • 18,000 COC assessments were calculated by OFI; • 8,500 members had COC assessments; and • $627 million was paid to LTCFs. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure COC assessments are calculated correctly • Lack of adequate procedures to ensure system exception reports are complete and accurate Effect: • Inaccurate COC assessments, deductions, and retroactive changes may result in overpayments or underpayments for members or the State. • Potential questioned costs and disallowances Recommendation: We recommend that: • OFI enhance oversight procedures to ensure that COC assessments are calculated and deducted correctly. • OMS collaborate with OFI to ensure that system exception reports capture all COC-related claims which require adjustments. Corrective Action Plan: See F-28 Management’s Response: The Department partially agrees with this finding. The Department agrees with the two exceptions found by the Office of the State Auditor. However, we believe that the Department has reasonable assurance with the controls in place that results in a 97% compliance with the COC calculations, which has not decreased from previous findings. No corrective action is necessary as a result of an error rate of only 3%. The Department will continue to actively manage and monitor the Cost of Care system in compliance with federal regulations. In response to the first of two errors identified by OSA, OMS will request an update to an existing Cost of Care report supplied by a third-party vendor. Changes to cost of care are contained in the Retroactive Cost of Care Report, however if there is a second determination of cost of care in a month and the result is identical to the first change in the month, neither is included in the report. This is an error in the report logic that must be corrected. A Change Request will be created to modify and correct the report so that the latest change in the month will be reported to be acted on by OMS. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Department agrees with the exceptions identified in the Condition. The Department’s disagreement is derived from the three percent sample payment error rate. The Department asserts that the error rate is acceptable and thus, no corrective action is necessary; however, for the two exceptions OSA identified, existing control procedures resulted in inaccurate claim payments. While OSA recognizes that achieving 100 percent accuracy in calculating COC assessments and applying COC deductions would likely not be feasible, the identified control deficiencies indicate that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 24-1106-05)
(2024-069) Title: Internal control over Medicaid cost of care assessments and deductions needs improvement Prior Year Findings: See scheduleof Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 42 CFR 435.725; MaineCare Eligibility Manual, Part 14, Section 6 The Department must establish 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 reduce its payment to an institution for services provided to an individual by the amount that remains after deducting certain amounts from the member’s total income. This remaining amount is the member’s maximum share of the cost, known as cost of care (COC). Condition: A COC assessment represents the required contribution that a MaineCare recipient must pay toward care in a Long Term Care Facility (LTCF). The Office for Family Independence (OFI) is responsible for COC assessments for all Medicaid members in the State. COC assessments are either calculated by the Automated Client Eligibility System or calculated manually by eligibility specialists. System-generated COC assessments are not subject to secondary review. A COC deduction represents the amount of assessment that was deducted from a paid claim. Members may have an assessment calculated but may never have a claim with a deduction utilizing that assessment. The Office of MaineCare Services (OMS) is responsible for applying assessments to submitted claims prior to payment. The Office of the State Auditor (OSA) tested 60 COC assessments and related deductions from paid claims. OSA identified: • one COC assessment was not calculated correctly or retroactively adjusted. The COC was higher than it should have been by $10. The assessment was $1,099 and should have been $1,089 for six months during the fiscal year. This member had six claims where the incorrect COC was applied. • one COC deduction was not deducted correctly from the paid claim. The COC deducted was lower than it should have been by $22. The assessment was $1,713 for two months during the fiscal year and the amount that was deducted was $1,691. This member had two claims where the incorrect COC deduction was applied. OSA selected a non-statistical random sample. Context: In fiscal year 2024, approximately: • 18,000 COC assessments were calculated by OFI; • 8,500 members had COC assessments; and • $627 million was paid to LTCFs. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure COC assessments are calculated correctly • Lack of adequate procedures to ensure system exception reports are complete and accurate Effect: • Inaccurate COC assessments, deductions, and retroactive changes may result in overpayments or underpayments for members or the State. • Potential questioned costs and disallowances Recommendation: We recommend that: • OFI enhance oversight procedures to ensure that COC assessments are calculated and deducted correctly. • OMS collaborate with OFI to ensure that system exception reports capture all COC-related claims which require adjustments. Corrective Action Plan: See F-28 Management’s Response: The Department partially agrees with this finding. The Department agrees with the two exceptions found by the Office of the State Auditor. However, we believe that the Department has reasonable assurance with the controls in place that results in a 97% compliance with the COC calculations, which has not decreased from previous findings. No corrective action is necessary as a result of an error rate of only 3%. The Department will continue to actively manage and monitor the Cost of Care system in compliance with federal regulations. In response to the first of two errors identified by OSA, OMS will request an update to an existing Cost of Care report supplied by a third-party vendor. Changes to cost of care are contained in the Retroactive Cost of Care Report, however if there is a second determination of cost of care in a month and the result is identical to the first change in the month, neither is included in the report. This is an error in the report logic that must be corrected. A Change Request will be created to modify and correct the report so that the latest change in the month will be reported to be acted on by OMS. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Department agrees with the exceptions identified in the Condition. The Department’s disagreement is derived from the three percent sample payment error rate. The Department asserts that the error rate is acceptable and thus, no corrective action is necessary; however, for the two exceptions OSA identified, existing control procedures resulted in inaccurate claim payments. While OSA recognizes that achieving 100 percent accuracy in calculating COC assessments and applying COC deductions would likely not be feasible, the identified control deficiencies indicate that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 24-1106-05)
(2024-069) Title: Internal control over Medicaid cost of care assessments and deductions needs improvement Prior Year Findings: See scheduleof Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Office of MaineCare Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 42 CFR 435.725; MaineCare Eligibility Manual, Part 14, Section 6 The Department must establish 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 reduce its payment to an institution for services provided to an individual by the amount that remains after deducting certain amounts from the member’s total income. This remaining amount is the member’s maximum share of the cost, known as cost of care (COC). Condition: A COC assessment represents the required contribution that a MaineCare recipient must pay toward care in a Long Term Care Facility (LTCF). The Office for Family Independence (OFI) is responsible for COC assessments for all Medicaid members in the State. COC assessments are either calculated by the Automated Client Eligibility System or calculated manually by eligibility specialists. System-generated COC assessments are not subject to secondary review. A COC deduction represents the amount of assessment that was deducted from a paid claim. Members may have an assessment calculated but may never have a claim with a deduction utilizing that assessment. The Office of MaineCare Services (OMS) is responsible for applying assessments to submitted claims prior to payment. The Office of the State Auditor (OSA) tested 60 COC assessments and related deductions from paid claims. OSA identified: • one COC assessment was not calculated correctly or retroactively adjusted. The COC was higher than it should have been by $10. The assessment was $1,099 and should have been $1,089 for six months during the fiscal year. This member had six claims where the incorrect COC was applied. • one COC deduction was not deducted correctly from the paid claim. The COC deducted was lower than it should have been by $22. The assessment was $1,713 for two months during the fiscal year and the amount that was deducted was $1,691. This member had two claims where the incorrect COC deduction was applied. OSA selected a non-statistical random sample. Context: In fiscal year 2024, approximately: • 18,000 COC assessments were calculated by OFI; • 8,500 members had COC assessments; and • $627 million was paid to LTCFs. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure COC assessments are calculated correctly • Lack of adequate procedures to ensure system exception reports are complete and accurate Effect: • Inaccurate COC assessments, deductions, and retroactive changes may result in overpayments or underpayments for members or the State. • Potential questioned costs and disallowances Recommendation: We recommend that: • OFI enhance oversight procedures to ensure that COC assessments are calculated and deducted correctly. • OMS collaborate with OFI to ensure that system exception reports capture all COC-related claims which require adjustments. Corrective Action Plan: See F-28 Management’s Response: The Department partially agrees with this finding. The Department agrees with the two exceptions found by the Office of the State Auditor. However, we believe that the Department has reasonable assurance with the controls in place that results in a 97% compliance with the COC calculations, which has not decreased from previous findings. No corrective action is necessary as a result of an error rate of only 3%. The Department will continue to actively manage and monitor the Cost of Care system in compliance with federal regulations. In response to the first of two errors identified by OSA, OMS will request an update to an existing Cost of Care report supplied by a third-party vendor. Changes to cost of care are contained in the Retroactive Cost of Care Report, however if there is a second determination of cost of care in a month and the result is identical to the first change in the month, neither is included in the report. This is an error in the report logic that must be corrected. A Change Request will be created to modify and correct the report so that the latest change in the month will be reported to be acted on by OMS. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Department agrees with the exceptions identified in the Condition. The Department’s disagreement is derived from the three percent sample payment error rate. The Department asserts that the error rate is acceptable and thus, no corrective action is necessary; however, for the two exceptions OSA identified, existing control procedures resulted in inaccurate claim payments. While OSA recognizes that achieving 100 percent accuracy in calculating COC assessments and applying COC deductions would likely not be feasible, the identified control deficiencies indicate that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 24-1106-05)
(2024-070) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 procedures in place to ensure the accuracy and completeness of the drug rebate amounts invoiced by the vendor. Though the Department validates that only rebatable drugs are invoiced and all rebatable drugs are included for invoicing, this review is performed after the invoicing cycle. In addition, the Department does not compare drug utilization data to the number of dispensed units invoiced, or corroborate that the correct URA is applied to each NDC to ensure that the vendor has calculated the rebate correctly. Context: In fiscal year 2024, the State invoiced approximately $300 million for rebatable drugs and received approximately $216 million in rebates. Of the $216 million in rebates, approximately $144 million was returned to the Federal government. Due to the amount of time rebate negotiations may take, discrepancies will exist between the invoiced total and the total amount of rebates received. 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, including: • validating that only rebatable drugs are invoiced and 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-28 Management’s Response: The Department disagrees with this finding. PRIMS (Pharmacy Rebate Information Management System), provided to the State of Maine by a third-party vendor, is a proven system in production in many locations and PRIMS has passed a wide variety of Federal and State audits. The drug rebate program is complex and there are numerous steps in the process which have already been demonstrated and/or provided to the Office of State Auditor. The controls described to the State Auditor previously (Pre-invoicing controls, pharmacy claims controls and medical claims controls) address all three of the Auditors’ Recommendations. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the State to establish and maintain effective internal controls. The Department’s Management Response stating that the vendor’s drug rebate information system “is a proven system in production in many locations” that “has passed a wide variety of Federal and State audits” only further validates that the Department is fully relying on the vendor to ensure the accuracy and completeness of drug rebate invoices. As stated in Management’s Response “the drug rebate program is complex” which further emphasizes the need for proper oversight. Existing reliance on the vendor demonstrates that the Department does not have adequate oversight procedures in place. In addition, the Department asserts controls are in place to address OSA’s Recommendation; however, the controls referenced in Management’s Response do not adequately address the risk associated with the issues noted in the Condition. The pre-invoicing controls referenced by the Department are performed at a summary level and the pharmacy and medical claims controls are not directly tied to the drug rebate invoicing process. The finding remains as stated. (State Number: 24-1106-07)
(2024-070) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 procedures in place to ensure the accuracy and completeness of the drug rebate amounts invoiced by the vendor. Though the Department validates that only rebatable drugs are invoiced and all rebatable drugs are included for invoicing, this review is performed after the invoicing cycle. In addition, the Department does not compare drug utilization data to the number of dispensed units invoiced, or corroborate that the correct URA is applied to each NDC to ensure that the vendor has calculated the rebate correctly. Context: In fiscal year 2024, the State invoiced approximately $300 million for rebatable drugs and received approximately $216 million in rebates. Of the $216 million in rebates, approximately $144 million was returned to the Federal government. Due to the amount of time rebate negotiations may take, discrepancies will exist between the invoiced total and the total amount of rebates received. 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, including: • validating that only rebatable drugs are invoiced and 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-28 Management’s Response: The Department disagrees with this finding. PRIMS (Pharmacy Rebate Information Management System), provided to the State of Maine by a third-party vendor, is a proven system in production in many locations and PRIMS has passed a wide variety of Federal and State audits. The drug rebate program is complex and there are numerous steps in the process which have already been demonstrated and/or provided to the Office of State Auditor. The controls described to the State Auditor previously (Pre-invoicing controls, pharmacy claims controls and medical claims controls) address all three of the Auditors’ Recommendations. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the State to establish and maintain effective internal controls. The Department’s Management Response stating that the vendor’s drug rebate information system “is a proven system in production in many locations” that “has passed a wide variety of Federal and State audits” only further validates that the Department is fully relying on the vendor to ensure the accuracy and completeness of drug rebate invoices. As stated in Management’s Response “the drug rebate program is complex” which further emphasizes the need for proper oversight. Existing reliance on the vendor demonstrates that the Department does not have adequate oversight procedures in place. In addition, the Department asserts controls are in place to address OSA’s Recommendation; however, the controls referenced in Management’s Response do not adequately address the risk associated with the issues noted in the Condition. The pre-invoicing controls referenced by the Department are performed at a summary level and the pharmacy and medical claims controls are not directly tied to the drug rebate invoicing process. The finding remains as stated. (State Number: 24-1106-07)
(2024-070) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 procedures in place to ensure the accuracy and completeness of the drug rebate amounts invoiced by the vendor. Though the Department validates that only rebatable drugs are invoiced and all rebatable drugs are included for invoicing, this review is performed after the invoicing cycle. In addition, the Department does not compare drug utilization data to the number of dispensed units invoiced, or corroborate that the correct URA is applied to each NDC to ensure that the vendor has calculated the rebate correctly. Context: In fiscal year 2024, the State invoiced approximately $300 million for rebatable drugs and received approximately $216 million in rebates. Of the $216 million in rebates, approximately $144 million was returned to the Federal government. Due to the amount of time rebate negotiations may take, discrepancies will exist between the invoiced total and the total amount of rebates received. 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, including: • validating that only rebatable drugs are invoiced and 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-28 Management’s Response: The Department disagrees with this finding. PRIMS (Pharmacy Rebate Information Management System), provided to the State of Maine by a third-party vendor, is a proven system in production in many locations and PRIMS has passed a wide variety of Federal and State audits. The drug rebate program is complex and there are numerous steps in the process which have already been demonstrated and/or provided to the Office of State Auditor. The controls described to the State Auditor previously (Pre-invoicing controls, pharmacy claims controls and medical claims controls) address all three of the Auditors’ Recommendations. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the State to establish and maintain effective internal controls. The Department’s Management Response stating that the vendor’s drug rebate information system “is a proven system in production in many locations” that “has passed a wide variety of Federal and State audits” only further validates that the Department is fully relying on the vendor to ensure the accuracy and completeness of drug rebate invoices. As stated in Management’s Response “the drug rebate program is complex” which further emphasizes the need for proper oversight. Existing reliance on the vendor demonstrates that the Department does not have adequate oversight procedures in place. In addition, the Department asserts controls are in place to address OSA’s Recommendation; however, the controls referenced in Management’s Response do not adequately address the risk associated with the issues noted in the Condition. The pre-invoicing controls referenced by the Department are performed at a summary level and the pharmacy and medical claims controls are not directly tied to the drug rebate invoicing process. The finding remains as stated. (State Number: 24-1106-07)
(2024-070) 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 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 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 procedures in place to ensure the accuracy and completeness of the drug rebate amounts invoiced by the vendor. Though the Department validates that only rebatable drugs are invoiced and all rebatable drugs are included for invoicing, this review is performed after the invoicing cycle. In addition, the Department does not compare drug utilization data to the number of dispensed units invoiced, or corroborate that the correct URA is applied to each NDC to ensure that the vendor has calculated the rebate correctly. Context: In fiscal year 2024, the State invoiced approximately $300 million for rebatable drugs and received approximately $216 million in rebates. Of the $216 million in rebates, approximately $144 million was returned to the Federal government. Due to the amount of time rebate negotiations may take, discrepancies will exist between the invoiced total and the total amount of rebates received. 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, including: • validating that only rebatable drugs are invoiced and 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-28 Management’s Response: The Department disagrees with this finding. PRIMS (Pharmacy Rebate Information Management System), provided to the State of Maine by a third-party vendor, is a proven system in production in many locations and PRIMS has passed a wide variety of Federal and State audits. The drug rebate program is complex and there are numerous steps in the process which have already been demonstrated and/or provided to the Office of State Auditor. The controls described to the State Auditor previously (Pre-invoicing controls, pharmacy claims controls and medical claims controls) address all three of the Auditors’ Recommendations. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the State to establish and maintain effective internal controls. The Department’s Management Response stating that the vendor’s drug rebate information system “is a proven system in production in many locations” that “has passed a wide variety of Federal and State audits” only further validates that the Department is fully relying on the vendor to ensure the accuracy and completeness of drug rebate invoices. As stated in Management’s Response “the drug rebate program is complex” which further emphasizes the need for proper oversight. Existing reliance on the vendor demonstrates that the Department does not have adequate oversight procedures in place. In addition, the Department asserts controls are in place to address OSA’s Recommendation; however, the controls referenced in Management’s Response do not adequately address the risk associated with the issues noted in the Condition. The pre-invoicing controls referenced by the Department are performed at a summary level and the pharmacy and medical claims controls are not directly tied to the drug rebate invoicing process. The finding remains as stated. (State Number: 24-1106-07)
(2024-071) Title: Internal control over Medicaid paid medical claims 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; MaineCare Benefits Manual, Chapter 101, Section 90 The Department must establish 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 MaineCare Benefits Manual states that the Medicaid program will reimburse at the lowest applicable rate for covered physician services. Condition: The Department’s Office of MaineCare Services (OMS) is billed by medical providers for services provided to Medicaid members. Provider reimbursement rates for certain medical services increased January 1, 2024; however, providers continued to bill OMS utilizing outdated rates until a retroactive adjustment was processed by OMS in March 2024 for certain medical services reimbursed in January and February. The Office of the State Auditor (OSA) tested 60 paid medical claims and identified one claim that was reimbursed at a higher than authorized rate. As a result, OMS overpaid the provider by $5. To determine the pervasiveness of the error, OSA reviewed all claims for the same medical service paid between January 1 and the March 2024 retroactive adjustment and found 510 claims that were never retroactively adjusted. A total of $3,300 was identified as overpaid to providers. OSA selected a non-statistical random sample. Context: In fiscal year 2024, $2.2 billion was paid to providers for medical claims. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure all medical claims are paid correctly Effect: • Inaccurate paid claims resulted in overpayments and may also result in underpayments to providers. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance oversight procedures to ensure that authorized provider reimbursement rates are utilized, and any retroactive adjustments are applied to all affected paid claims accurately and completely. This will ensure that Medicaid claims are not overpaid or underpaid to providers. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. OMS has determined that there is an issue with the manual intervention taken by the third-party vendor to prepare this report. This caused some claims that required adjustment to be excluded from the report. Through discussion with the vendor, OMS has determined that the vendor does not have a standardized procedure to prepare this report for OMS. Maine will require the vendor to prepare a Desk Level Procedure (DLP) for the preparation of this report. This DLP will be reviewed by the State and the report will go through testing and validation, as necessary, before the report is used again. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 (State Number: 24-1106-06)
(2024-071) Title: Internal control over Medicaid paid medical claims 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; MaineCare Benefits Manual, Chapter 101, Section 90 The Department must establish 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 MaineCare Benefits Manual states that the Medicaid program will reimburse at the lowest applicable rate for covered physician services. Condition: The Department’s Office of MaineCare Services (OMS) is billed by medical providers for services provided to Medicaid members. Provider reimbursement rates for certain medical services increased January 1, 2024; however, providers continued to bill OMS utilizing outdated rates until a retroactive adjustment was processed by OMS in March 2024 for certain medical services reimbursed in January and February. The Office of the State Auditor (OSA) tested 60 paid medical claims and identified one claim that was reimbursed at a higher than authorized rate. As a result, OMS overpaid the provider by $5. To determine the pervasiveness of the error, OSA reviewed all claims for the same medical service paid between January 1 and the March 2024 retroactive adjustment and found 510 claims that were never retroactively adjusted. A total of $3,300 was identified as overpaid to providers. OSA selected a non-statistical random sample. Context: In fiscal year 2024, $2.2 billion was paid to providers for medical claims. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure all medical claims are paid correctly Effect: • Inaccurate paid claims resulted in overpayments and may also result in underpayments to providers. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance oversight procedures to ensure that authorized provider reimbursement rates are utilized, and any retroactive adjustments are applied to all affected paid claims accurately and completely. This will ensure that Medicaid claims are not overpaid or underpaid to providers. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. OMS has determined that there is an issue with the manual intervention taken by the third-party vendor to prepare this report. This caused some claims that required adjustment to be excluded from the report. Through discussion with the vendor, OMS has determined that the vendor does not have a standardized procedure to prepare this report for OMS. Maine will require the vendor to prepare a Desk Level Procedure (DLP) for the preparation of this report. This DLP will be reviewed by the State and the report will go through testing and validation, as necessary, before the report is used again. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 (State Number: 24-1106-06)
(2024-071) Title: Internal control over Medicaid paid medical claims 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; MaineCare Benefits Manual, Chapter 101, Section 90 The Department must establish 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 MaineCare Benefits Manual states that the Medicaid program will reimburse at the lowest applicable rate for covered physician services. Condition: The Department’s Office of MaineCare Services (OMS) is billed by medical providers for services provided to Medicaid members. Provider reimbursement rates for certain medical services increased January 1, 2024; however, providers continued to bill OMS utilizing outdated rates until a retroactive adjustment was processed by OMS in March 2024 for certain medical services reimbursed in January and February. The Office of the State Auditor (OSA) tested 60 paid medical claims and identified one claim that was reimbursed at a higher than authorized rate. As a result, OMS overpaid the provider by $5. To determine the pervasiveness of the error, OSA reviewed all claims for the same medical service paid between January 1 and the March 2024 retroactive adjustment and found 510 claims that were never retroactively adjusted. A total of $3,300 was identified as overpaid to providers. OSA selected a non-statistical random sample. Context: In fiscal year 2024, $2.2 billion was paid to providers for medical claims. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure all medical claims are paid correctly Effect: • Inaccurate paid claims resulted in overpayments and may also result in underpayments to providers. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance oversight procedures to ensure that authorized provider reimbursement rates are utilized, and any retroactive adjustments are applied to all affected paid claims accurately and completely. This will ensure that Medicaid claims are not overpaid or underpaid to providers. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. OMS has determined that there is an issue with the manual intervention taken by the third-party vendor to prepare this report. This caused some claims that required adjustment to be excluded from the report. Through discussion with the vendor, OMS has determined that the vendor does not have a standardized procedure to prepare this report for OMS. Maine will require the vendor to prepare a Desk Level Procedure (DLP) for the preparation of this report. This DLP will be reviewed by the State and the report will go through testing and validation, as necessary, before the report is used again. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 (State Number: 24-1106-06)
(2024-071) Title: Internal control over Medicaid paid medical claims 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 (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; MaineCare Benefits Manual, Chapter 101, Section 90 The Department must establish 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 MaineCare Benefits Manual states that the Medicaid program will reimburse at the lowest applicable rate for covered physician services. Condition: The Department’s Office of MaineCare Services (OMS) is billed by medical providers for services provided to Medicaid members. Provider reimbursement rates for certain medical services increased January 1, 2024; however, providers continued to bill OMS utilizing outdated rates until a retroactive adjustment was processed by OMS in March 2024 for certain medical services reimbursed in January and February. The Office of the State Auditor (OSA) tested 60 paid medical claims and identified one claim that was reimbursed at a higher than authorized rate. As a result, OMS overpaid the provider by $5. To determine the pervasiveness of the error, OSA reviewed all claims for the same medical service paid between January 1 and the March 2024 retroactive adjustment and found 510 claims that were never retroactively adjusted. A total of $3,300 was identified as overpaid to providers. OSA selected a non-statistical random sample. Context: In fiscal year 2024, $2.2 billion was paid to providers for medical claims. Cause: • Lack of supervisory oversight • Lack of adequate procedures to ensure all medical claims are paid correctly Effect: • Inaccurate paid claims resulted in overpayments and may also result in underpayments to providers. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance oversight procedures to ensure that authorized provider reimbursement rates are utilized, and any retroactive adjustments are applied to all affected paid claims accurately and completely. This will ensure that Medicaid claims are not overpaid or underpaid to providers. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. OMS has determined that there is an issue with the manual intervention taken by the third-party vendor to prepare this report. This caused some claims that required adjustment to be excluded from the report. Through discussion with the vendor, OMS has determined that the vendor does not have a standardized procedure to prepare this report for OMS. Maine will require the vendor to prepare a Desk Level Procedure (DLP) for the preparation of this report. This DLP will be reviewed by the State and the report will go through testing and validation, as necessary, before the report is used again. Contact: Michelle Probert, Director, Office of MaineCare Services, DHHS, 207-287-2093 (State Number: 24-1106-06)
(2024-073) 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-77 to E-78 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 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) Subawards Reporting System (FSRS). 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 FSRS. The Office of the State Auditor (OSA) tested 33 DG – PA subawards totaling $8,864,828 that exceeded the first-tier subaward threshold. Federal regulations require the following information for identified noncompliance to be included in FFATA findings: • two subawards totaling $364,133 were not reported; • 27 subawards totaling $8,246,776 were not reported timely; • no subaward amounts were reported incorrectly; and • 21 subawards reported incorrect key data elements. OSA selected a non-statistical random sample. Context: In fiscal year 2024, MEMA was required to report 280 first-tier subawards totaling approximately $57 million under the DG – PA program. First-tier subawards account for 83 percent of the program’s fiscal year 2024 expenditures. Cause: • Lack of adequate policies and procedures • 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 enhance policies and procedures to ensure that first-tier subawards are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. MEMA’s procedure for Federal Financial Reporting already includes a standardized workbook template to compile Federal and State financial data for each grant award and facilitate accurate completion of the SF-425 form. The workbook is prepared by one MEMA staff member, and the resulting draft SF-425 form is reviewed by another MEMA staff member prior to finalization and signature by MEMA’s Authorized Representative. MEMA engaged with Federal funding partners in FY2024 to understand the appropriate data validation processes for financial reporting within the Public Assistance Grants Portal and Payment Management System (PMS), including participation in a training workshop and receiving data validation feedback from reviewers at the Federal level. These reporting process refinements will be reflected in updates to the existing SOP, and an additional review tab will be incorporated into the existing SF-425 preparatory workbooks to document review and data validation steps in detail. Contact: Sunny Cyr, Business Office Director, MEMA, DVEM, 207-707-2507 (State Number: 24-1502-03)
(2024-073) 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-77 to E-78 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 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) Subawards Reporting System (FSRS). 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 FSRS. The Office of the State Auditor (OSA) tested 33 DG – PA subawards totaling $8,864,828 that exceeded the first-tier subaward threshold. Federal regulations require the following information for identified noncompliance to be included in FFATA findings: • two subawards totaling $364,133 were not reported; • 27 subawards totaling $8,246,776 were not reported timely; • no subaward amounts were reported incorrectly; and • 21 subawards reported incorrect key data elements. OSA selected a non-statistical random sample. Context: In fiscal year 2024, MEMA was required to report 280 first-tier subawards totaling approximately $57 million under the DG – PA program. First-tier subawards account for 83 percent of the program’s fiscal year 2024 expenditures. Cause: • Lack of adequate policies and procedures • 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 enhance policies and procedures to ensure that first-tier subawards are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. MEMA’s procedure for Federal Financial Reporting already includes a standardized workbook template to compile Federal and State financial data for each grant award and facilitate accurate completion of the SF-425 form. The workbook is prepared by one MEMA staff member, and the resulting draft SF-425 form is reviewed by another MEMA staff member prior to finalization and signature by MEMA’s Authorized Representative. MEMA engaged with Federal funding partners in FY2024 to understand the appropriate data validation processes for financial reporting within the Public Assistance Grants Portal and Payment Management System (PMS), including participation in a training workshop and receiving data validation feedback from reviewers at the Federal level. These reporting process refinements will be reflected in updates to the existing SOP, and an additional review tab will be incorporated into the existing SF-425 preparatory workbooks to document review and data validation steps in detail. Contact: Sunny Cyr, Business Office Director, MEMA, DVEM, 207-707-2507 (State Number: 24-1502-03)
(2024-074) Title: Internal control over DG – PA program cash management needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Defense, Veterans and Emergency Management Administrative and Financial Services State Bureau: Maine Emergency Management Agency Security and Employment Service Center 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-77 to E-78 Compliance Area: Cash management Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 31 CFR 205(A); 2024 Treasury-State Agreement (Maine) The Department must establish 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. A Treasury-State Agreement (TSA) documents the accepted funding techniques and methods for calculating interest agreed upon by the U.S. Department of the Treasury and the State. The funding technique agreed upon in the State’s TSA for the Disaster Grants – Public Assistance (DG – PA) program is the “actual drawdown – weekly” method. This method specifies that the State shall make weekly drawdowns based on actual expenditures which occurred in the past weekly period. Condition: The Maine Emergency Management Agency (MEMA) administers the DG – PA program for the State. The Department of Administrative and Financial Services’ Security and Employment Service Center (SESC) is responsible for requesting drawdowns of Federal funds in order to pay DG – PA program expenditures on behalf of MEMA. MEMA reviews, authorizes, and submits approved invoices to SESC for payment. SESC then requests Federal funds based on the approved invoices and processes the authorized payment once Federal funds are received. SESC completed 69 Federal grant drawdowns for the DG – PA program in fiscal year 2024, which is not consistent with the TSA requirements that only allow for weekly drawdowns. The Office of the State Auditor (OSA) performed analytical procedures and identified a drawdown that was drawn in advance of actual disbursement. OSA reviewed additional drawdowns and identified other drawdowns during fiscal year 2024 that were also drawn in advance of actual disbursement. This process is not consistent with TSA requirements. As a result, MEMA had excess cash on hand during fiscal year 2024 and is not in compliance with cash management requirements. Context: In fiscal year 2024, there were 69 Federal grant drawdowns totaling approximately $69 million for the DG – PA program. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • The Federal government may improve more stringent program-specific cash management requirements based on noncompliance. Recommendation: We recommend that the Department implement policies and procedures to ensure compliance with the funding techniques specified in the TSA when requesting Federal funds. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. Corrective action was already implemented mid-way through State Fiscal Year 2024 as polices and procedures were updated, and a weekly draw process has been since been used. The Security and Employment Service Center began reconciling draw requests as part of these updated procedures. A majority of the cash on hand was due to contract modifications as the cash was drawn but the payments could not be made until the contract modifications were completed in the accounting system. MEMA made subsequent updates to the cash management process to avoid drawing for payments that might be impacted by unanticipated delays in the final two weeks of each quarter. In addition, the department discussed modifying the Treasury-State Agreement (TSA) with the Office of the State Treasurer. The 2025 TSA lists a Weekly Drawdown - Actual & Estimate funding technique for this major program as some of these payments are too substantial for the State to process and have to wait for reimbursement. Contact: Sunny Cyr, Business Office Director, MEMA, DVEM, 207-707-2507 (State Number: 24-1502-04)
(2024-074) Title: Internal control over DG – PA program cash management needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Defense, Veterans and Emergency Management Administrative and Financial Services State Bureau: Maine Emergency Management Agency Security and Employment Service Center 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-77 to E-78 Compliance Area: Cash management Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 31 CFR 205(A); 2024 Treasury-State Agreement (Maine) The Department must establish 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. A Treasury-State Agreement (TSA) documents the accepted funding techniques and methods for calculating interest agreed upon by the U.S. Department of the Treasury and the State. The funding technique agreed upon in the State’s TSA for the Disaster Grants – Public Assistance (DG – PA) program is the “actual drawdown – weekly” method. This method specifies that the State shall make weekly drawdowns based on actual expenditures which occurred in the past weekly period. Condition: The Maine Emergency Management Agency (MEMA) administers the DG – PA program for the State. The Department of Administrative and Financial Services’ Security and Employment Service Center (SESC) is responsible for requesting drawdowns of Federal funds in order to pay DG – PA program expenditures on behalf of MEMA. MEMA reviews, authorizes, and submits approved invoices to SESC for payment. SESC then requests Federal funds based on the approved invoices and processes the authorized payment once Federal funds are received. SESC completed 69 Federal grant drawdowns for the DG – PA program in fiscal year 2024, which is not consistent with the TSA requirements that only allow for weekly drawdowns. The Office of the State Auditor (OSA) performed analytical procedures and identified a drawdown that was drawn in advance of actual disbursement. OSA reviewed additional drawdowns and identified other drawdowns during fiscal year 2024 that were also drawn in advance of actual disbursement. This process is not consistent with TSA requirements. As a result, MEMA had excess cash on hand during fiscal year 2024 and is not in compliance with cash management requirements. Context: In fiscal year 2024, there were 69 Federal grant drawdowns totaling approximately $69 million for the DG – PA program. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • The Federal government may improve more stringent program-specific cash management requirements based on noncompliance. Recommendation: We recommend that the Department implement policies and procedures to ensure compliance with the funding techniques specified in the TSA when requesting Federal funds. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. Corrective action was already implemented mid-way through State Fiscal Year 2024 as polices and procedures were updated, and a weekly draw process has been since been used. The Security and Employment Service Center began reconciling draw requests as part of these updated procedures. A majority of the cash on hand was due to contract modifications as the cash was drawn but the payments could not be made until the contract modifications were completed in the accounting system. MEMA made subsequent updates to the cash management process to avoid drawing for payments that might be impacted by unanticipated delays in the final two weeks of each quarter. In addition, the department discussed modifying the Treasury-State Agreement (TSA) with the Office of the State Treasurer. The 2025 TSA lists a Weekly Drawdown - Actual & Estimate funding technique for this major program as some of these payments are too substantial for the State to process and have to wait for reimbursement. Contact: Sunny Cyr, Business Office Director, MEMA, DVEM, 207-707-2507 (State Number: 24-1502-04)