(2024-037) Title: Internal control over WIC 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 Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 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 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. 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 WIC program’s subrecipients comply with Federal requirements; however, MeCDC’s subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. All of WIC’s subawards are cost-settled. Therefore, DCM and MeCDC procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: In fiscal year 2024, the Department provided $5.9 million to subrecipients from WIC grant funds totaling $22.8 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 WIC program. Corrective Action Plan: See F-18 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. The finding remains as stated. (State Number: 24-1113-03)
(2024-038) Title: Internal control over WIC cash balances needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services Administrative and Financial Services State Bureau: Maine Center for Disease Control & Prevention Health and Human Services Service Center Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 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; 2 CFR 200.302 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 terms and conditions of the awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and other assets related to the Federally-funded activities. Condition: The Office of the State Auditor (OSA) issued finding 2019-021 as a result of procedures performed for the fiscal year 2019 audit. This finding identified that “Program personnel did not take the existing cash balance into consideration when requesting Federal funds for the Food portion of the WIC grant.” This resulted in an excess cash balance for the Food grant. The finding continues to be repeated as the Department has not returned the funds to the Federal awarding agency and the excess cash balance remains. Context: The Department calculated a $1,055,104 residual cash balance from the 2013 WIC Food grant and a $4,100 residual cash balance from the 2018 WIC Food grant. Cause: Lack of adequate recordkeeping and account reconciliation in prior years. The Department has made efforts to seek disposition from the Federal awarding agency; however, the issue has not been resolved. Effect: The State may be required to return $1,059,204 to the Federal awarding agency. Recommendation: We recommend that the Department continue efforts to resolve this matter with the Federal awarding agency. Corrective Action Plan: See F-18 Management’s Response: The Department and the DHHS Financial Service Center agree with this finding. The Department will work with the Federal Agency on steps needed to resolve the cash discrepancy. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 24-1113-01)
(2024-038) Title: Internal control over WIC cash balances needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services Administrative and Financial Services State Bureau: Maine Center for Disease Control & Prevention Health and Human Services Service Center Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 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; 2 CFR 200.302 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 terms and conditions of the awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and other assets related to the Federally-funded activities. Condition: The Office of the State Auditor (OSA) issued finding 2019-021 as a result of procedures performed for the fiscal year 2019 audit. This finding identified that “Program personnel did not take the existing cash balance into consideration when requesting Federal funds for the Food portion of the WIC grant.” This resulted in an excess cash balance for the Food grant. The finding continues to be repeated as the Department has not returned the funds to the Federal awarding agency and the excess cash balance remains. Context: The Department calculated a $1,055,104 residual cash balance from the 2013 WIC Food grant and a $4,100 residual cash balance from the 2018 WIC Food grant. Cause: Lack of adequate recordkeeping and account reconciliation in prior years. The Department has made efforts to seek disposition from the Federal awarding agency; however, the issue has not been resolved. Effect: The State may be required to return $1,059,204 to the Federal awarding agency. Recommendation: We recommend that the Department continue efforts to resolve this matter with the Federal awarding agency. Corrective Action Plan: See F-18 Management’s Response: The Department and the DHHS Financial Service Center agree with this finding. The Department will work with the Federal Agency on steps needed to resolve the cash discrepancy. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 24-1113-01)
(2024-039) Confidential finding, see below for more information Title: Internal control over UI claim payments needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Eligibility Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 20 CFR 615.8; Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; Unemployment Insurance Program Letter No. 5-13; 26 MRSA 1190 through 1199 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 State administering Unemployment Insurance (UI) must have State laws and policies in place that are consistent with Federal provisions and required by 20 CFR 615.8; the Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; and Unemployment Insurance Program Letter No. 5-13, as follows: • Standards for claim filing and processing including appeals and reviews, communication with claimants and employers, eligibility standards and disqualifications, and Interstate Benefit Payments and agreements • Standards for reasonable work search criteria and policies requiring performance of internal audits of work search activity • Standards for program integrity outlining procedures for identification and recovery of overpayments and penalties, including recovery through offset of future benefit payments The State of Maine’s statutory requirements for UI program benefits are outlined in 26 MRSA 1190 through 1199. Condition: Pursuant to paragraph 6.63 of the U.S. Government Accountability Office’s Government Auditing Standards (also known as the Yellow Book), we omitted details from this finding as they are confidential under the provisions of 5 MRSA 244-C (3). Though the content of this finding has been redacted, we provided the Department(s) with detailed information regarding the specific condition we identified, as well as the related criteria, context, causes, effects, and our specific recommendations for improvement. The Department has complementary controls in place over claimant eligibility, including: • performance of internal work search audits by MDOL personnel for one percent of weekly claims, and • establishment of a Benefits Quality Control Unit tasked with investigating a prescribed number of UI paid claims and denied claims each week. The Office of the State Auditor performed data analytic procedures surrounding continuing eligibility requirements for weekly claim submission and work search activity entered by claimants and identified the following indications of claimant program abuse: • 21 claimants reported repetitive work search activities for all fiscal year 2024 claims, ranging from 7 to 14 consecutive benefit weeks. • 24 claimants reported the same work search contact for all fiscal year 2024 claims, ranging from 17 to 34 consecutive benefit weeks. • Six claimants reported new return to work dates ranging from 7 to 11 consecutive benefit weeks, which generated new temporary unemployment waivers allowing claimants to file weekly claims without reporting work search activities. • Five claimants reported part-time work totaling less than 10 hours per week ranging from 8 to 21 consecutive benefit weeks, generating new weekly unemployment waivers allowing the claimant to file weekly claims without reporting work search activities. Context: In fiscal year 2024, the UI program provided approximately $119 million in State UI benefits and $800 thousand in Federal UI benefits. Cause: • Lack of adequate policies and procedures over continuing claimant eligibility determinations • Lack of adequate supervisory oversight of information system application controls Effect: • Claimants may be incorrectly determined eligible for UI benefits without meeting Federal program requirements, which may result in unallowable issuances of benefit payments that could remain undetected. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance policies and procedures to require: • implementation of additional information system application controls. • incorporation of data analytics and data cross-matching procedures to prevent or detect payments to ineligible claimants. This will provide assurance that eligibility requirements are met and adequately supported, and that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. Corrective Action Plan: See F-18 Management’s Response: The Department partially agrees with this finding. The Department acknowledges these audit findings and uses them to refine its system controls to enhance compliance and accuracy in processing claims. Regarding work search waivers for individuals with a return-to-work date, the Department agrees with the finding and implemented a system update in January 2025 to more effectively administer return to work, work search waivers. Based on specifics of the selected cases, management disagrees with the characterization of some work search activities as repetitive. Work search assistance through the Department’s CareerCenters may appear repetitive on a weekly claim but work search assistance from Department staff is both varied and productive. Additionally, job openings during the covered period were frequent, even with the same employer. When work search or other issues are detected on a claim, the Department schedules a fact-finding interview and requests additional documentation. State law requires the Department to continue an individual’s benefits pending a fact-finding review, for which the individual must be given at least seven days’ notice. In addition to conducting fact-finding interviews on issues detected on the weekly claim, the Department randomly audits 3% of claims each week to verify the information provided. Using information obtained through fact-finding interview, a claims adjudicator may uphold the payment of benefits or require the benefits to be repaid. While our policies and procedures align with existing regulations and are functioning as intended, the Department is committed to continuously improving our systems and processes in order to better serve claimants and uphold program integrity. The identified cases will be used to further refine our procedures. Contact: Suzan McKechnie, Director, Bureau of Unemployment Compensation, DOL, 207-621-5126 Auditor’s Concluding Remarks: The Department is required to establish and maintain effective internal control over compliance with eligibility requirements. While the Department does have controls in place to perform fact-finding interviews and work search audits, those procedures are carried out after UI benefits have been paid. The data analytics procedures noted in the Condition identified potential instances of program abuse and claimant activity with a high risk of noncompliance that was not detected by the Department’s existing internal controls. Implementation of additional information system application controls and incorporation of data analytics and data cross-matching procedures will provide further assurance that eligibility requirements are met and adequately supported, and that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. The finding remains as stated. (State Number: 24-1302-02)
(2024-039) Confidential finding, see below for more information Title: Internal control over UI claim payments needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Eligibility Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 20 CFR 615.8; Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; Unemployment Insurance Program Letter No. 5-13; 26 MRSA 1190 through 1199 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 State administering Unemployment Insurance (UI) must have State laws and policies in place that are consistent with Federal provisions and required by 20 CFR 615.8; the Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; and Unemployment Insurance Program Letter No. 5-13, as follows: • Standards for claim filing and processing including appeals and reviews, communication with claimants and employers, eligibility standards and disqualifications, and Interstate Benefit Payments and agreements • Standards for reasonable work search criteria and policies requiring performance of internal audits of work search activity • Standards for program integrity outlining procedures for identification and recovery of overpayments and penalties, including recovery through offset of future benefit payments The State of Maine’s statutory requirements for UI program benefits are outlined in 26 MRSA 1190 through 1199. Condition: Pursuant to paragraph 6.63 of the U.S. Government Accountability Office’s Government Auditing Standards (also known as the Yellow Book), we omitted details from this finding as they are confidential under the provisions of 5 MRSA 244-C (3). Though the content of this finding has been redacted, we provided the Department(s) with detailed information regarding the specific condition we identified, as well as the related criteria, context, causes, effects, and our specific recommendations for improvement. The Department has complementary controls in place over claimant eligibility, including: • performance of internal work search audits by MDOL personnel for one percent of weekly claims, and • establishment of a Benefits Quality Control Unit tasked with investigating a prescribed number of UI paid claims and denied claims each week. The Office of the State Auditor performed data analytic procedures surrounding continuing eligibility requirements for weekly claim submission and work search activity entered by claimants and identified the following indications of claimant program abuse: • 21 claimants reported repetitive work search activities for all fiscal year 2024 claims, ranging from 7 to 14 consecutive benefit weeks. • 24 claimants reported the same work search contact for all fiscal year 2024 claims, ranging from 17 to 34 consecutive benefit weeks. • Six claimants reported new return to work dates ranging from 7 to 11 consecutive benefit weeks, which generated new temporary unemployment waivers allowing claimants to file weekly claims without reporting work search activities. • Five claimants reported part-time work totaling less than 10 hours per week ranging from 8 to 21 consecutive benefit weeks, generating new weekly unemployment waivers allowing the claimant to file weekly claims without reporting work search activities. Context: In fiscal year 2024, the UI program provided approximately $119 million in State UI benefits and $800 thousand in Federal UI benefits. Cause: • Lack of adequate policies and procedures over continuing claimant eligibility determinations • Lack of adequate supervisory oversight of information system application controls Effect: • Claimants may be incorrectly determined eligible for UI benefits without meeting Federal program requirements, which may result in unallowable issuances of benefit payments that could remain undetected. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance policies and procedures to require: • implementation of additional information system application controls. • incorporation of data analytics and data cross-matching procedures to prevent or detect payments to ineligible claimants. This will provide assurance that eligibility requirements are met and adequately supported, and that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. Corrective Action Plan: See F-18 Management’s Response: The Department partially agrees with this finding. The Department acknowledges these audit findings and uses them to refine its system controls to enhance compliance and accuracy in processing claims. Regarding work search waivers for individuals with a return-to-work date, the Department agrees with the finding and implemented a system update in January 2025 to more effectively administer return to work, work search waivers. Based on specifics of the selected cases, management disagrees with the characterization of some work search activities as repetitive. Work search assistance through the Department’s CareerCenters may appear repetitive on a weekly claim but work search assistance from Department staff is both varied and productive. Additionally, job openings during the covered period were frequent, even with the same employer. When work search or other issues are detected on a claim, the Department schedules a fact-finding interview and requests additional documentation. State law requires the Department to continue an individual’s benefits pending a fact-finding review, for which the individual must be given at least seven days’ notice. In addition to conducting fact-finding interviews on issues detected on the weekly claim, the Department randomly audits 3% of claims each week to verify the information provided. Using information obtained through fact-finding interview, a claims adjudicator may uphold the payment of benefits or require the benefits to be repaid. While our policies and procedures align with existing regulations and are functioning as intended, the Department is committed to continuously improving our systems and processes in order to better serve claimants and uphold program integrity. The identified cases will be used to further refine our procedures. Contact: Suzan McKechnie, Director, Bureau of Unemployment Compensation, DOL, 207-621-5126 Auditor’s Concluding Remarks: The Department is required to establish and maintain effective internal control over compliance with eligibility requirements. While the Department does have controls in place to perform fact-finding interviews and work search audits, those procedures are carried out after UI benefits have been paid. The data analytics procedures noted in the Condition identified potential instances of program abuse and claimant activity with a high risk of noncompliance that was not detected by the Department’s existing internal controls. Implementation of additional information system application controls and incorporation of data analytics and data cross-matching procedures will provide further assurance that eligibility requirements are met and adequately supported, and that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. The finding remains as stated. (State Number: 24-1302-02)
(2024-040) Title: Internal control over UI overpayments needs improvement Prior Year Findings: None State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 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; Public Law Nos. 112-40 and 113-67 The Department must establish and maintain effective internal controls 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 State is required to properly identify and establish overpayments, track repayments, and process them regularly to ensure recovered payments are returned to the original funding source. The Department must sufficiently automate Unemployment Insurance (UI) operations and appropriately handle overpayment information to obtain, correspond, maintain, and transmit information concerning UI benefits. Condition: The Maine Department of Labor (MDOL) promotes and maintains the integrity of the UI program through the prevention, detection, and recovery of UI overpayments made to claimants. An UI overpayment may be established if a claimant is ultimately deemed ineligible for UI benefits after already receiving payment. MDOL must properly identify and establish overpayments to ensure that appropriate follow up action is initiated based on the classification of the overpayment. Once an overpayment is established and classified, a Demand for Payment Notice is generated within the ReEmployME system and transmitted to the claimant to initiate recoupment. The ReEmployME information system stores all claimant overpayment information including data on specific overpayment classifications, causes, and decisions; history logs; and correspondence with claimants. The Office of the State Auditor (OSA) tested 60 claimant overpayments to determine whether MDOL properly established, classified, and monitored overpayments and collections, and found that: • the ReEmployME system established a duplicate overpayment for one claimant for the same claim week. Because of the duplication, one record of overpayment totaling $520 remained active within the system after the overpayment was liquidated. • One Demand for Payment Notice was not communicated to the claimant. The overpayment totaling $9,668 remained active and uncollected from August 2023 to the time of audit testing in February 2025. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the UI program provided $119 million in State UI benefits and $800,000 in Federal UI benefits, and the Department identified $6.5 million in claimant overpayments. Cause: • ReEmployME system error • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Inaccurate UI claimant and overpayment information within the ReEmployME system • Potential untimely or ineffective recoupment of UI benefit overpayments • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures, including increased supervisory oversight, to ensure that claimant overpayments are accurately recorded in the ReEmployME system, properly monitored, and collected timely. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with this finding. Remediation efforts are already underway for both issues. Several parameters have been established based on prior findings, and manual monitoring is in place to ensure overpayments are correctly identified. Additionally, federal compliance with the Benefit Accuracy Measurement (BAM) program provides an additional layer of oversight to verify the accuracy of unemployment claims. BAM audits are completed by a unit within the Bureau of Unemployment Compensation. Audits include a comprehensive review of claims and payments. To further enhance oversight, system parameters will be implemented to ensure functionality aligns with MDOL’s agreed-upon standards. The agency remains committed to ensuring compliance, improving system functionality, and reinforcing procedural accuracy to mitigate future occurrences of these issues. Contact: Suzan McKechnie Director, Bureau of Unemployment Compensation, MDOL, 207-621-5126 (State Number: 24-1302-01)
(2024-040) Title: Internal control over UI overpayments needs improvement Prior Year Findings: None State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 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; Public Law Nos. 112-40 and 113-67 The Department must establish and maintain effective internal controls 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 State is required to properly identify and establish overpayments, track repayments, and process them regularly to ensure recovered payments are returned to the original funding source. The Department must sufficiently automate Unemployment Insurance (UI) operations and appropriately handle overpayment information to obtain, correspond, maintain, and transmit information concerning UI benefits. Condition: The Maine Department of Labor (MDOL) promotes and maintains the integrity of the UI program through the prevention, detection, and recovery of UI overpayments made to claimants. An UI overpayment may be established if a claimant is ultimately deemed ineligible for UI benefits after already receiving payment. MDOL must properly identify and establish overpayments to ensure that appropriate follow up action is initiated based on the classification of the overpayment. Once an overpayment is established and classified, a Demand for Payment Notice is generated within the ReEmployME system and transmitted to the claimant to initiate recoupment. The ReEmployME information system stores all claimant overpayment information including data on specific overpayment classifications, causes, and decisions; history logs; and correspondence with claimants. The Office of the State Auditor (OSA) tested 60 claimant overpayments to determine whether MDOL properly established, classified, and monitored overpayments and collections, and found that: • the ReEmployME system established a duplicate overpayment for one claimant for the same claim week. Because of the duplication, one record of overpayment totaling $520 remained active within the system after the overpayment was liquidated. • One Demand for Payment Notice was not communicated to the claimant. The overpayment totaling $9,668 remained active and uncollected from August 2023 to the time of audit testing in February 2025. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the UI program provided $119 million in State UI benefits and $800,000 in Federal UI benefits, and the Department identified $6.5 million in claimant overpayments. Cause: • ReEmployME system error • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Inaccurate UI claimant and overpayment information within the ReEmployME system • Potential untimely or ineffective recoupment of UI benefit overpayments • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures, including increased supervisory oversight, to ensure that claimant overpayments are accurately recorded in the ReEmployME system, properly monitored, and collected timely. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with this finding. Remediation efforts are already underway for both issues. Several parameters have been established based on prior findings, and manual monitoring is in place to ensure overpayments are correctly identified. Additionally, federal compliance with the Benefit Accuracy Measurement (BAM) program provides an additional layer of oversight to verify the accuracy of unemployment claims. BAM audits are completed by a unit within the Bureau of Unemployment Compensation. Audits include a comprehensive review of claims and payments. To further enhance oversight, system parameters will be implemented to ensure functionality aligns with MDOL’s agreed-upon standards. The agency remains committed to ensuring compliance, improving system functionality, and reinforcing procedural accuracy to mitigate future occurrences of these issues. Contact: Suzan McKechnie Director, Bureau of Unemployment Compensation, MDOL, 207-621-5126 (State Number: 24-1302-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-041) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of the Interior U.S. Department of Labor U.S. Department of Education U.S. Department of Health and Human Services Assistance Listing Title: Fish and Wildlife Cluster Unemployment Insurance (UI) (COVID-19) Special Education Cluster (IDEA) (COVID-19) Rehabilitation Services – Vocational Rehabilitation Grants to States CCDF Cluster (COVID-19) Assistance Listing Number: 15.605, 15.611, 15.626; 17.225; 84.027, 84.173; 84.126; 93.489, 93.575, 93.596 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 200.430; 5 MRSA 7061 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. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR must provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. The Office of the State Auditor (OSA) tested 19 job classification specifications for compliance with 5 MRSA 7061. BHR could not provide documentation for 14 of the 19 job classification specifications tested to support that they were updated within five years as required by 5 MRSA 7061. Additionally, BHR’s current tracking mechanism does not effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2024, approximately $139 million in payroll expenditures were charged to Federal grants. This represents approximately ten percent of fiscal year 2024 Statewide payroll expenditures, which totaled $1.3 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2024. Cause: • Lack of resources • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • enhance oversight regarding the maintenance of the State classification and compensation plan in accordance with State statute; • implement policies and procedures to ensure updates or reviews of the State classification and compensation plan at the job classification specification level are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-19 Management’s Response: The Department disagrees with this finding. The procedure referenced in 5 M.R.S. Sec. 7061(4) is laid out in 18-389 C.M.R. Ch. 4. The Department complies with these written policies and procedures as required by federal and state law. Section 7061(4) was last updated in 2023, with an effective date in October 2023. Pursuant to the JSC on Appropriations, Section 7061(4)(A) requires a review every five years of the state compensation plan for each class or position in the classified service. The FJA process is not related to the compensation plan, however, it is administered under a separate internal control structure that is in place and operating effectively and ensures that the compensation for individual employees is reasonable for the services rendered. The requirement for review of each classification through the FJA process is covered under Section 7061(4)(C) and is required to be reviewed every 10 years. It is also important to note that the Department has conferred with the OAG, who determined that Section 7061(4)(C) is not retroactive, meaning the Department has another 8.5 years to complete a review of all classifications. Additionally, salary studies conducted on State employee wages have shown that the salary and wages of job classifications paid by the State are consistently lower than industry averages, removing the risk that the utilization of these salary schedules as a component of payroll costs will cause overcharges to Federal grants. Contact: Michael J. Dunn, Acting State Human Resources Officer, Bureau of Human Resources, DAFS, 207-287-4651 Auditor’s Concluding Remarks: OSA acknowledges BHR’s reference to 5 MRSA 7061(4), as amended in October 2023, and the procedures for the classification maintenance outlined in 18-389 C.M.R. Ch. 4. We also recognize the distinction BHR draws between the five-year statutory requirement under 5 MRSA 7061(4)(A) for updating job descriptions and compensation plan components, and the ten-year classification plan review introduced under 5 MRSA 7061(4)(C). OSA’s review focused on BHR’s compliance with the five-year update requirement under 5 MRSA 7061(4)(A). While the statute was amended in 2023, the requirement that job descriptions be updated at least every five years has been in place since 1987. The recent amendment did not create this requirement; it expanded BHR’s obligation by tying the update process to the compensation plan and introducing a separate ten-year comprehensive classification review under 5 MRSA 7061(4)(C). These changes reflect an intent to strengthen oversight and modernize the State’s personnel system, not to delay or diminish BHR’s statutory responsibilities. To distinguish between BHR’s statutory responsibilities under 5 MRSA 7061(4)(A) and 5 MRSA 7061(4)(C), subsection (4)(A) requires periodic updating of job descriptions and the compensation plan at least every five years; this ensures that individual job classification specifications remain current and accurately reflect the duties and responsibilities of State positions. In contrast, subsection (4)(C), introduced in 2023, requires a broader, ten-year comprehensive review of the classification plan as a whole. The two requirements serve different purposes and operate on separate cycles. The five-year review of individual classifications under subsection (4)(A) remains an ongoing statutory obligation, regardless of the addition of subsection (4)(C). While BHR references its internal procedures under 18-389 C.M.R. Ch. 4 as evidence of compliance, those procedures do not incorporate or reflect the statutory five-year update requirement in subsection (4)(A) or the ten-year update in subsection (4)(C). Furthermore, BHR could not provide documentation to support that 14 of the 19 job classifications tested by OSA had been reviewed or updated within the required timeframe. BHR does not have a comprehensive system to track classification review dates across the classification plan, making it difficult to demonstrate compliance with the statute or proactively manage updates. Internal policy may guide operations, but compliance is ultimately measured against the statutory requirements that govern those operations. The issues identified in audit testing also have implications for the compensation system. Under 5 MRSA 7065, the State’s compensation plan is developed based on the classification plan, with salary grades assigned to specific job classes according to documented duties and responsibilities. The classification plan is the foundational structure upon which compensation decisions are made. If job descriptions are outdated, or not periodically reviewed as required, positions may be misaligned with inappropriate salary grades, which may lead to pay that does not accurately reflect the nature or complexity of the work, including Federally-funded positions. Without a properly maintained classification system, the State cannot ensure that compensation, whether paid with State or Federal funds, is supported by a valid and compliant classification system. Under 2 CFR 200.430(a)(2), compensation for personal services is allowable under Federal awards only when it follows “an appointment made in accordance with the recipient’s…laws, rules, or written policies.” This Federal regulation places the burden of compliance on the State’s adherence to its own legal framework. The Federal government allows flexibility, but that flexibility hinges on the condition that the State follows its own laws; it is the minimum threshold for allowability requirements over personnel costs. Compliance with this law is not discretionary; it is a legal obligation and direct reflection of the expectations placed on the State by the Legislature and the Federal government. BHR asserts that State employee compensation is consistently below market rates and therefore poses no risk of overcharging Federal programs. Even if BHR’s current assertion that State salaries are below market is accepted, Federal guidance provides that reasonableness in amount is only one factor in determining allowability. Compensation must also follow lawful appointment processes and reflect compliance with State personnel laws. A claim of underpayment is not a compensating control to prevent noncompliance with required classification updates. The following statutes only serve to emphasize the responsibility placed upon BHR and the State Human Resources Officer. Under 5 MRSA 7036, the State Human Resources Officer is explicitly responsible for adopting rules for both classification and compensation plans (7036(I) and (J)), enforcing the Civil Service Law (7036(21)), and conducting both short-term and long-term planning for the State’s personnel system (7036(10)). The Officer is also responsible for responding to reclassification requests (7036(5)) and working closely with agencies on their personnel needs (7036(7)). These statutory responsibilities further confirm that maintaining accurate, up-to-date classification specifications is not discretionary. Moreover, failure to fulfill these legal duties has implications that underscore the purpose of a centralized human resources function. These conditions present a risk to the accessibility to public service employment, including potential delayed hiring decisions and diminished ability to attract and retain a skilled workforce. When classification structures are outdated and statutory mandates are not followed, BHR cannot deliver on its mission. We acknowledge BHR’s consultation with the Office of the Attorney General and its efforts to clarify its interpretation of the law; however, the condition observed during the audit period reflects a neutralization of internal controls and subsequent risk of noncompliance with statutory requirements that directly affect both classification and the allowability of personnel costs under Federal awards. The finding remains as stated. (State Number: 24-0111-01)
(2024-042) Title: Internal control over HAF Program reporting and earmarking needs improvement Prior Year Findings: None State Department: Professional and Financial Regulation State Bureau: Consumer Credit Protection Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Homeowner Assistance Fund Program (COVID-19) Assistance Listing Number: 21.026 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: None Criteria: 2 CFR 200.303; American Rescue Plan Act of 2021, Section 3206; 15 USC 9058d(c)(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. The Department must submit quarterly reports providing financial and performance data regarding administration of the Homeowner Assistance Fund (HAF) Program that include financial data, targeting data, and other information. The Department is also required to submit an annual report to the U.S. Department of the Treasury regarding the impact of the HAF Program. The HAF Program’s earmarking requirements include: • counseling or educational efforts targeted to households eligible to be served related to foreclosure prevention or displacement, in an aggregate amount up to five percent of the funding received by the HAF participant. • planning, community engagement, needs assessment, and administrative expenses for qualified expenses, in an aggregate amount not to exceed 15 percent of the funding received by the HAF participant. If the HAF participant has only received the initial ten percent of its allocation, no more than 50 percent of the initial payment is permitted to be used for the expenses mentioned. • participants providing not less than 60 percent of funds to homeowners with income less than 100 percent Area Median Income (AMI) or 100 percent of U.S. median income. • participants should target homeowners that are classified as Socially Disadvantaged Individuals and 100 percent AMI or less. Condition: The Department contracts with a subrecipient to administer the HAF Program. A Memorandum of Understanding (MOU) between the Department and the subrecipient outlines the following: • The subrecipient is responsible for preparation of all required reporting under the HAF Program. • The Department is responsible for certification and submission of all reports prepared by the subrecipient. During fiscal year 2024, four quarterly financial reports and one annual performance report for the HAF Program were required to be submitted to the Federal government. The MOU requires Department certification and submission of all HAF Program reports; however, the subrecipient prepared and certified all required reports during fiscal year 2024 with no oversight from the Department. In addition, the Department did not maintain records of any fiscal year 2024 HAF Program financial or performance reports or supporting documentation. The Department solicited the reports from the subrecipient only after the Office of the State Auditor’s (OSA) request for audit documentation. The Department subsequently provided OSA with all reports in response to the audit request; however, the Department could not provide documentation to support: • the Department’s review of each financial and performance report prepared by the subrecipient, as it did not occur prior to certification and submission by the subrecipient. • amounts reported on the State’s fiscal year 2024 HAF Program financial and performance reports. • amounts reported on key line items for HAF Program earmarking requirements and related obligation and expenditure totals. The Department has no assurance that HAF Program reports prepared by the subrecipient and submitted to the Federal government on behalf of the State are accurate or properly supported. In addition, the Department has no assurance that the HAF Program was in compliance with Federal requirements for earmarking, as supporting documentation for such compliance is part of the subrecipient’s reporting process. Furthermore, OSA was unable to verify the accuracy of submitted reports or compliance with earmarking requirements, as supporting documentation was not maintained. Context: In fiscal year 2024, the Department expended $29.4 million in HAF Program funds; the entire amount was passed through to the subrecipient. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Noncompliance with Federal regulations • HAF Program reports, including earmarking requirements, submitted to the Federal government are not properly supported and may not be accurate as documentation is not reviewed or maintained by the Department. • Incomplete or inaccurate HAF Program reports may result in incorrect information used by the Federal government for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department establish and implement policies and procedures to require a documented review and approval of all HAF Program reports and related earmarking requirements prepared by the subrecipient, prior to certification and submission by the Department as required by the established MOU. This will ensure that information reported to the Federal government is accurate, complete, and properly supported, and that earmarking requirements have been met. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The Department will establish and implement additional policies and procedures for this program. The Department will require that the subrecipient submit the required program and financial reports to the department for review prior to submission to the federal agency starting with the reporting period ending March 2025 reporting period. Contact: Rachel Hendsbee, Director, Administrative Services Division, Department of Professional and Financial Regulation, 207-624-8500 (State Number: 24-1698-01)
(2024-043) Title: Internal control over HAF Program subrecipient monitoring needs improvement Prior Year Findings: None State Department: Professional and Financial Regulation State Bureau: Consumer Credit Protection Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Homeowner Assistance Fund Program (COVID-19) Assistance Listing Number: 21.026 Federal Award Identification Number: See E-77 to E-78 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish 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: • evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring procedures. • verify that the subrecipient is audited as required when a subrecipient’s Federal award expenditures are expected to equal or exceed $750,000 during the fiscal year. • 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 Homeowner Assistance Fund (HAF) Program provides funding to mitigate financial hardships associated with the pandemic, including preventing homeowner mortgage delinquencies, defaults, foreclosures, and loss of utilities or home energy services and displacements of homeowners experiencing financial hardships. In fiscal year 2024, the Department passed through HAF Program funds to one subrecipient responsible for administering the program. The Department contracted with a vendor to perform all subrecipient monitoring for the HAF Program; however, only one monitoring report for the first quarter of fiscal year 2024 had been received by the Department at the time of audit testing in February 2025. No subrecipient monitoring information was received by the Department during the actual use of the grant award in fiscal year 2024. As a result, the Department had no assurance in fiscal year 2024 that: • the subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward was evaluated for purposes of determining the appropriate subrecipient monitoring procedures. • the subrecipient received a Single Audit as required. The Office of the State Auditor reviewed the quarterly monitoring report received from the vendor and noted that the subrecipient’s Single Audit requirement and related monitoring was not addressed. • the activities of the subrecipient were monitored as necessary to ensure that the subaward was used for authorized purposes and in compliance with Federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals were achieved. In addition to untimely vendor subrecipient monitoring reports, the Department’s review and approval of subrecipient reimbursement requests was not adequately designed, as submission of detailed expenditure information with the subrecipient’s requests for reimbursement of HAF Program funds was not required. A summary spreadsheet outlining actual and projected expenditures for the second-tier subrecipient was the only support provided to the Department with each reimbursement request, which does not provide adequate detail to ensure that the subaward was used for authorized purposes. Context: In fiscal year 2024, the Department expended $29.4 million in HAF Program funds; the entire amount was passed through to the subrecipient. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Noncompliance with Federal regulations • Lack of ongoing or adequate subrecipient monitoring procedures could result in subrecipient noncompliance that would go undetected during the award term. Recommendation: We recommend that the Department develop and implement policies and procedures to ensure that: • all Federal award program subrecipients of the Department are subject to ongoing monitoring activities during the grant award term. • detailed documentation in support of subrecipient reimbursement requests is received prior to payment approval. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The Department has contracted with a vendor to perform subrecipient monitoring of the HAF program. The Department will ensure that subrecipient reports adequately detail expenditures. Contact: Rachel Hendsbee, Director, Administrative Services Division, Department of Professional and Financial Regulation, 207-624-8500 (State Number: 24-1698-02)
(2024-044) Title: Internal control over CSLFRF reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Administrative and Financial Services State Bureau: Security and Employment Service Center Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 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; 2 CFR 200.332(b); 2 CFR 200.510 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 accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with reporting requirements. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended. At a minimum, the SEFA must provide total Federal awards expended for each individual Federal program and the Assistance Listing Number (ALN) and include the total amount provided to subrecipients from each Federal program. Condition: The Department of Administrative and Financial Services’ Security and Employment Service Center (SESC) is responsible for accurately recording information needed to report on the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Quarterly Project and Expenditure Reports. Information from these CSLFRF reports is used by the Office of the State Controller for SEFA preparation. The Office of the State Auditor reviewed amounts reported on the SEFA and identified $9.7 million of Federal expenditures incorrectly reported as amounts provided to subrecipients that should have been reported as direct expenditures. SESC inaccurately identified vendors as subrecipients. As a result, vendor payments were incorrectly classified as subrecipient payments on the CSLFRF Quarterly Project and Expenditure Reports and were incorrectly included in the initial amount reported on the SEFA as amounts provided to subrecipients. Context: Payments to the providers totaled $9.7 million of the $209.6 million in fiscal year 2024 CSLFRF expenditures. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Incomplete or inaccurate reporting of expenditures on the CSLFRF reports and SEFA, which are submitted to the Federal government, may result in incorrect information used for programmatic, policy or statistical purposes. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement policies and procedures to ensure contractors and subrecipients are appropriately classified and reported on the CSLFRF Quarterly Project and Expenditure Reports and SEFA. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The Security and Employment Service will continue to work with our partner agencies to help ensure the sub-recipient/vendor classification is appropriately determined when the initial contracts are written. In this case, the contracts ended in July 2023 and the contracting agency did not amend the contracts to change the classification. Contact: Marilyn Leimbach, Director, SESC, DAFS, 207-248-2556 (State Number: 24-1699-03)
(2024-045) Title: Internal control over CSLFRF subrecipient risk evaluation procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Labor State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 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: As part of the American Rescue Plan Act, the State was advanced approximately $997 million in Federal Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) to support its response to and recovery from the COVID-19 public health emergency. The Maine Department of Labor (MDOL) partnered with subrecipients to support the administration of CSLFRF. MDOL has a documented policy that requires subrecipient risk evaluations. The Office of the State Auditor (OSA) tested 44 subrecipients paid by various State agencies under CSLFRF, including five MDOL subrecipients, to ensure that proper subrecipient monitoring was performed as required by Federal regulations. MDOL subrecipient monitoring procedures included providing Federal award information in grant award agreements, communicating program guidelines, establishing reporting requirements, providing technical assistance, and communicating with the subrecipients to discuss program performance; however, MDOL could not provide evidence to demonstrate that monitoring procedures were established in response to an evaluation of the subrecipient’s risk of noncompliance for the five MDOL subrecipients tested. OSA selected a nonstatistical random sample. Context: During fiscal year 2024, the Department provided $5.8 million to 39 MDOL subrecipients, from a total of $137.9 million provided to all CSLFRF subrecipients. Cause: • Lack of supervisory oversight • Lack of adequate procedures Effect: 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 enhance oversight over 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-20 Management’s Response: The Department agrees with this finding. MDOL received funds via the Maine Jobs and Recovery Plan to accomplish several goals across 20 unique initiatives. To best meet the goals of several initiatives, MDOL selected various partners to work with - via a competitive Request for Applications (RFA) process or other contractual arrangement. MDOL’s competitive RFA process required evaluating individual applicants’ previous experience in managing grants and delivering similar programs, which directly correlated with selection criteria and grantee scoring. After selection, grantees are required to submit quarterly performance reports and participate in grantee check-in calls at least twice per year. For grantees not on track to meet their performance goals, monthly calls were held with interim progress milestones set to track performance. While the above procedures were implemented for all subrecipients, going forward, the Department will document that monitoring procedures were established in response to an evaluation of the subrecipient’s risk of noncompliance. Contact: Kimberley Moore, Director, Bureau of Employment Services, MDOL, 207-620-0183 (State Number: 24-1699-04)
(2024-046) Title: Internal control over CSLFRF subrecipient cash management needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Division of Contract Management Office of Aging and Disability Services Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 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 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. 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 of Aging and Disability Services (OADS) is responsible for ensuring its subrecipients that received Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) comply with Federal requirements; however, OADS’ subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. All of the CSLFRF subawards from OADS are cost-settled. Therefore, DCM and OADS procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: In fiscal year 2024, the Department provided $1.5 million to OADS subrecipients from CSLFRF grant funds totaling $209.6 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 OADS 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 CSLFRF program. Corrective Action Plan: See F-20 Management’s Response: The Department disagrees with this finding. The Department is in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement of 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. The finding remains as stated. (State Number: 24-1699-05)
(2024-047) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center 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: Allowable costs/cost principles Period of performance Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: ALN 84.027 $7,303 Likely Questioned Costs: ALN 84.027 $31,768; likely questioned costs were projected by dividing the known questioned costs identified in the sample by total Federal fiscal year 2022 grant award expenditures tested to establish an error rate, then applying that error rate to total Federal fiscal year 2022 grant award expenditures paid in fiscal year 2024. Criteria: 2 CFR 200.303; 2 CFR 200.403; 34 CFR 76.703 and .709 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 obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC procedures include review and approval of requests for reimbursement from LEAs and other programmatic costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance Federal regulations applicable to the SEC program in fiscal year 2024 relate to the Federal fiscal year 2022 grant award. The award’s obligation period ended September 30, 2023, and the liquidation period ended 120 calendar days following, on January 28, 2024. The Office of the State Auditor (OSA) tested 60 expenditure transactions that occurred during the Federal fiscal year 2022 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations. OSA identified five transactions totaling $7,303 where obligations occurred after September 30, 2023. Therefore, these transactions did not meet Federal fiscal year 2022 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $7,303. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the Department expended $68.2 million in SEC program funds. Of this total, $5.8 million of Federal fiscal year 2022 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2024. 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 enhance procedures and increase oversight to ensure that obligation of grant funds is made within period of performance requirements established in the terms and conditions of Federal grant awards. 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: 24-1201-01)
(2024-047) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center 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: Allowable costs/cost principles Period of performance Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: ALN 84.027 $7,303 Likely Questioned Costs: ALN 84.027 $31,768; likely questioned costs were projected by dividing the known questioned costs identified in the sample by total Federal fiscal year 2022 grant award expenditures tested to establish an error rate, then applying that error rate to total Federal fiscal year 2022 grant award expenditures paid in fiscal year 2024. Criteria: 2 CFR 200.303; 2 CFR 200.403; 34 CFR 76.703 and .709 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 obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC procedures include review and approval of requests for reimbursement from LEAs and other programmatic costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance Federal regulations applicable to the SEC program in fiscal year 2024 relate to the Federal fiscal year 2022 grant award. The award’s obligation period ended September 30, 2023, and the liquidation period ended 120 calendar days following, on January 28, 2024. The Office of the State Auditor (OSA) tested 60 expenditure transactions that occurred during the Federal fiscal year 2022 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations. OSA identified five transactions totaling $7,303 where obligations occurred after September 30, 2023. Therefore, these transactions did not meet Federal fiscal year 2022 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $7,303. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the Department expended $68.2 million in SEC program funds. Of this total, $5.8 million of Federal fiscal year 2022 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2024. 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 enhance procedures and increase oversight to ensure that obligation of grant funds is made within period of performance requirements established in the terms and conditions of Federal grant awards. 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: 24-1201-01)
(2024-047) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center 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: Allowable costs/cost principles Period of performance Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: ALN 84.027 $7,303 Likely Questioned Costs: ALN 84.027 $31,768; likely questioned costs were projected by dividing the known questioned costs identified in the sample by total Federal fiscal year 2022 grant award expenditures tested to establish an error rate, then applying that error rate to total Federal fiscal year 2022 grant award expenditures paid in fiscal year 2024. Criteria: 2 CFR 200.303; 2 CFR 200.403; 34 CFR 76.703 and .709 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 obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC procedures include review and approval of requests for reimbursement from LEAs and other programmatic costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance Federal regulations applicable to the SEC program in fiscal year 2024 relate to the Federal fiscal year 2022 grant award. The award’s obligation period ended September 30, 2023, and the liquidation period ended 120 calendar days following, on January 28, 2024. The Office of the State Auditor (OSA) tested 60 expenditure transactions that occurred during the Federal fiscal year 2022 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations. OSA identified five transactions totaling $7,303 where obligations occurred after September 30, 2023. Therefore, these transactions did not meet Federal fiscal year 2022 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $7,303. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the Department expended $68.2 million in SEC program funds. Of this total, $5.8 million of Federal fiscal year 2022 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2024. 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 enhance procedures and increase oversight to ensure that obligation of grant funds is made within period of performance requirements established in the terms and conditions of Federal grant awards. 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: 24-1201-01)
(2024-047) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: See schedule of Findings and Questioned costs for chart/table State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center 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: Allowable costs/cost principles Period of performance Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: ALN 84.027 $7,303 Likely Questioned Costs: ALN 84.027 $31,768; likely questioned costs were projected by dividing the known questioned costs identified in the sample by total Federal fiscal year 2022 grant award expenditures tested to establish an error rate, then applying that error rate to total Federal fiscal year 2022 grant award expenditures paid in fiscal year 2024. Criteria: 2 CFR 200.303; 2 CFR 200.403; 34 CFR 76.703 and .709 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 obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC procedures include review and approval of requests for reimbursement from LEAs and other programmatic costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance Federal regulations applicable to the SEC program in fiscal year 2024 relate to the Federal fiscal year 2022 grant award. The award’s obligation period ended September 30, 2023, and the liquidation period ended 120 calendar days following, on January 28, 2024. The Office of the State Auditor (OSA) tested 60 expenditure transactions that occurred during the Federal fiscal year 2022 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations. OSA identified five transactions totaling $7,303 where obligations occurred after September 30, 2023. Therefore, these transactions did not meet Federal fiscal year 2022 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $7,303. OSA selected a non-statistical random sample. Context: In fiscal year 2024, the Department expended $68.2 million in SEC program funds. Of this total, $5.8 million of Federal fiscal year 2022 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2024. 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 enhance procedures and increase oversight to ensure that obligation of grant funds is made within period of performance requirements established in the terms and conditions of Federal grant awards. 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: 24-1201-01)
(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)
(2024-048) 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)
(2024-048) 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)
(2024-048) 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)