State Agency: Illinois Department of Healthcare and Family Services (DHFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Children’s Health Insurance Program, Medicaid Cluster ALN and Program Expenditures: 93.767 ($510,412,808), 93.775/93.777/93.778 ($20,707,079,599) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Special Tests and Provisions – Managed Care Financial Audit Finding 2024-019: Failure to Ensure Managed Care Organizations Properly Prepare Financial Reports Condition Found: DHFS did not ensure the annual financial audits prepared during the year ended June 30, 2024 for Managed Care Organizations (MCOs) of the Children’s Health Insurance Program (CHIP) and Medicaid Cluster programs met the requirements of the MCO contracts and federal regulations. DHFS did not obtain audited annual financial reports for MCOs that meet the requirements of the federal Medicaid regulations as reported in the State’s single audit reports for fiscal years 2021, 2022, and 2023. While we noted DHFS obtained audited MCO financial reports during State fiscal year 2024 from each of the six Illinois MCOs, the auditors issued adverse opinions on the annual MCO financial reports for three of four MCOs sampled in our procedures. Accordingly, these MCO financial reports were not prepared in accordance with generally accepted accounting principles (GAAP) as required by program regulations and the provisions of the MCO contracts. The auditors’ reports noted the MCO annual financial reports were prepared on a statutory basis of accounting which is assumed to be materially different than GAAP. We also noted DHFS did not perform follow up procedures during fiscal year 2024 related to the MCO audit reports with adverse opinions. Accordingly, we noted DHFS has not established internal control procedures to ensure the financial reports are prepared in accordance with GAAP. Criteria or Requirement: According to 42 CFR 438.3(m), the State requires that contracts with MCOs must submit audited GAAP financial reports specific to the Medicaid contract on an annual basis. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include implementing procedures to perform periodic audits of encounter and financial data submitted by, or on behalf of each of its MCOs. Cause: In discussing these conditions with DHFS officials, they stated the Department required the MCOs to submit GAAP reports in calendar year 2024. This was the Department’s initial experience with these reports and the review process was lengthy due to the effort to analyze and assess the information provided by each plan in comparison to the reported requirements Possible Asserted Effect: Failure to ensure the annual financial audits prepared for MCOs meet the requirements of the MCO contracts and federal regulations results in noncompliance with program requirements and may result in inaccurate capitation rate setting for the respective MCOs. Repeat Finding: While not considered a repeat of a prior year finding, a related finding was reported in the prior year audit as finding number 2023-020. (Finding Code 2024-019, 2023-020) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DHFS evaluate its procedures for reviewing financial audit reports to ensure the reports comply with the stated requirements and implement the necessary procedures to ensure the financial reports are prepared in accordance with program regulations and contract requirements. Views of DHFS Officials: DHFS accepts the recommendation. Upon determination that calendar year 2024 MCO GAAP report submissions did not comply with the 42 CFR 438.3(m) reporting requirements, the Department issued a compliance reporting notice to the MCOs in January 2025. This notice identified the reporting noncompliance and provided confirmation of reporting expectations for calendar year 2025 GAAP reporting. In follow-up to that communication, all calendar year 2025 GAAP reports have been submitted by each MCO, reviewed by the Department's Financial Team, and all reports have been deemed to meet the filing requirements required by 42 CFR 438.3(m). In addition, in calendar year 2025, one MCO did not fully comply with the calendar year 2025 GAAP reporting submission due date. The Department issued sanctions to the MCO for lack of compliance with the reporting timeframes. The Department also conducted discussions with the MCO to identify the cause of the non-compliance and worked with the MCO to secure compliance with reporting requirements. The Department confirms it is actively receiving GAAP reports from all MCOs on an annual basis, MCO reports comply with reporting requirements, and the same process that was established for calendar year 2025 GAAP reporting will be followed for calendar year 2026 reporting. Should MCOs fail to comply with calendar year 2026 GAAP reporting, the Department will consider and apply corrective action and/or sanction penalties as permitted under Contract.
State Agency: Illinois Department of Healthcare and Family Services (DHFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Children’s Health Insurance Program (CHIP), Medicaid Cluster ALN and Program Expenditures: 93.767 ($510,412,808), 93.775/93.777/93.778 ($20,707,079,599) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Special Tests and Provisions – Provider Eligibility (Screening and Enrollment) Finding 2024-020: Inadequate Procedures to Determine Provider Eligibility Condition Found: DHFS did not adequately screen providers of the Children’s Health Insurance Program (CHIP) and Medicaid Cluster programs to ensure Medicaid providers were not on the USDHHS Office of the Inspector General’s (OIG) List of Excluded Individuals/Entities (LEIE) at the time the services were performed. The Illinois Medicaid Program Advanced Cloud Technology (IMPACT) system is used by DHFS for the enrollment and screening of CHIP and Medicaid providers. On a monthly basis, IMPACT automatically checks providers enrolled within IMPACT to the LEIE to verify the provider is not on the LEIE. During our testing of 60 CHIP and 60 Medicaid beneficiary payments (totaling $188,646 and $264,110, respectively) to ensure the providers were not on the LEIE on the date of service performed, we identified 3 CHIP payments (totaling $39,136) and 2 Medicaid payments (totaling $10,824) to providers for services where the providers were not checked against the LEIE to verify they were not on the LEIE for the month when services were performed. Payments made to providers on behalf of beneficiaries of the CHIP and Medicaid Cluster programs totaled approximately $504,533,794 and $19,742,854,768, respectively, during the year ended June 30, 2024. Criteria or Requirement: 42 CFR 455.436(a) requires the State Medicaid agency to confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of a provider through routine checks of federal databases. Additionally, 42 CFR 455.436(b) requires the State Medicaid agency to check the Social Security Administration's Death Master File, the National Plan and Provider Enumeration System, the LEIE, the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. 42 CFR 455.436(c) requires the State Medicaid agency to consult the appropriate databases to confirm identity upon enrollment and reenrollment and check the LEIE and EPLS no less frequently than monthly. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include establishing adequate procedures to screen providers of the CHIP and Medicaid Cluster programs, specifically, to ensure the providers were not on the LEIE for the month when the voucher was paid or the month when services were provided. Cause: In discussing these conditions with DHFS officials, they stated DHFS management stated the issues with the identified monthly batch screenings was due to a system defect. Possible Asserted Effect: Failure to adequately screen CHIP and Medicaid Cluster program providers may result in federal funds being paid to providers that should have been denied, which are unallowable costs. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-021. (Finding Code 2024-020, 2023-021, 2022-015, 2021-006) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DHFS address the IMPACT processing error for screening CHIP and Medicaid Cluster program providers, specifically, the process to check, on a monthly basis, that providers are not on the LEIE. Views of DHFS Officials: DHFS agrees with this finding.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E ALN and Program Expenditures: 93.658 ($157,279,978) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-022: Inadequate Process for Foster Care Daycare Maintenance Assistance Payments Condition Found: DCFS does not have an adequate process in place to ensure Foster Care daycare maintenance assistance payments are accurately paid based on its approved rate schedule. The foster care program provides funds to States for maintenance assistance payments to deliver substitute care for children who are under the jurisdiction of a Title IV-E agency and who need temporary placement or care outside their homes. Maintenance payments are made on behalf of eligible Title IV-E beneficiaries to individuals serving as foster family homes, to childcare institutions, or public or private child-placement or child-care agencies in accordance with the Title IV-E agency’s maintenance rate schedule. During our testing of foster care maintenance assistance payments, we reviewed 50 case files and related beneficiary payments (totaling $55,816) charged to the Foster Care program during the year ended June 30, 2024 for compliance with eligibility requirements and allowability of related benefits. We noted in our testing DCFS has not established adequate internal controls to ensure the daycare rates paid for Foster Care maintenance payments are consistent with the approved rate schedule. Specifically, we identified two day care maintenance assistance payments sampled (totaling $1,668) were not calculated using rates consistent with the approved DCFS day care rate schedule. The daily provider rates used to calculate the sampled payments were $40 and $44 respectively; whereas the rate that should have been used for both of these payments according to the approved DCFS day care rate schedule was $46. Accordingly, the payments calculated by DCFS were $172 less than what the payments should have been using the approved rate schedule. In response to the errors identified in our testing, we requested DCFS evaluate the population of daycare maintenance assistance payments made during the year ended June 30, 2024 to determine the cause of the errors in the payment rates used. Rather than evaluating the full population of daycare maintenance assistance payments, DCFS sampled 59 payments and identified 10 additional payments which were paid rates inconsistent with the approved rate schedule, but were not able to determine the extent of errors in the population. Accordingly, we were not able to quantify the magnitude of any noncompliance in the population to determine if material noncompliance occurred during the year ended June 30, 2024. Daycare maintenance assistance payments made on behalf of Foster Care beneficiaries totaled $2,055,171 during the year ended June 30, 2024. Payments made on behalf of beneficiaries of the Foster Care program totaled $33,332,268 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 42 USC 671(a)(11), which is implemented by 45 CFR 1356.21, the amount of payments made as foster care maintenance payments must be periodically reviewed to assure their appropriateness. Funds may be expended for foster care maintenance payments on behalf of eligible children, in accordance with the Title IV-E agency’s foster care maintenance payment rate schedule and in accordance with 45 CFR section 1356.21, to individuals serving as foster family homes, to childcare institutions, or public or private child-placement or child-care agencies. Such payments may include the cost of (and the cost of providing, including certain associated administrative and operating costs of a child care institution) food, clothing, shelter, daily supervision, school supplies, personal incidentals, liability insurance with respect to a child, and reasonable travel to the child’s home for visitation, as well as reasonable travel for the child to remain in the same school he or she was attending before placement in foster care (42 USC 672(b)(1) and (2), (c)(2), and 675(4)). In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure payments are made at the approved rates. Cause: In discussing these conditions with DCFS officials, they stated the issue was due to the certification rate forms that were filled out by childcare providers. Providers would sometimes fill out the forms using lower rates than they were entitled to charge. Possible Asserted Effect: Failure to ensure payment calculations are properly performed and approved provider rates are accurately entered in the system may result in unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-022) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS implement procedures to ensure foster care maintenance payments are properly calculated and consistent with the approved DCFS payment rate schedules. Views of DCFS Officials: The Department agrees and has implemented corrective action. In July 2025, the daycare eligibility program discontinued the use of certification rate forms. As a result, all childcare providers now receive the State established reimbursement rate, regardless of the rate they charge private-paying families. This change ensures that all childcare providers receive the funding that they are entitled to.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E Adoption Assistance, Temporary Assistance for Needy Families ALN and Program Expenditures: 93.658 ($157,279,978) 93.659 ($103,674,138), 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-023: Failure to Provide Supporting Documentation for Payroll and Related Costs Condition Found: DCFS could not provide adequate supporting documentation to substantiate payroll and related costs claimed for federal reimbursement under the Foster Care – Title IV-E (Foster Care), Adoption Assistance, and Temporary Assistance for Needy Families (TANF) programs. On a weekly basis, DCFS employees complete and sign timesheets to report and certify their time. These timesheets are then reviewed and approved by the employee’s immediate supervisor. The supervisor approves the timesheets based on their knowledge of the employee’s hours worked during the pay period. Timesheets are scanned for archiving once a month by the payroll department. Timesheets are manually entered into the time reporting system (Employee Monthly Time Report) which is used to accumulate the costs related to each cost center. Cost pool data from the time reporting system is used to identify personal service expenditures attributable to DCFS’s State and federal programs and to calculate and allocate the related fringe benefit charges and indirect costs. During our testing of 25 direct payroll expenditures charged to the cost pools allocated to the Foster Care, Adoption Assistance, and TANF programs (totaling $127,344) during the year ended June 30, 2024, we noted the following: • The timesheet for one employee (supporting cost pool payroll expenditures sampled of $3,735) could not be provided for testing. DCFS personnel stated they were unable to locate the timesheet for this employee for the sampled period. Upon further review, DCFS personnel noted timesheets were unable to be located for this employee and all employees within the same department (totaling four additional employees) for the entire fiscal year, resulting in approximately 120 missing timesheets (related to payroll, fringe benefits, and indirect costs included in the cost pool totaling $497,277, $399,834, and $194,253, respectively). As a result, the personal service (payroll and fringe benefit) expenditures, as well as related indirect costs, were not appropriately supported in accordance with the requirements of the applicable cost principles. Accordingly, the personal service expenditures and indirect costs were not allowable. • The hours reported for three employees (with sampled personal services expenditures from the cost pool of $15,727) in the timekeeping system used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by the agency exceeded the hours reported on manual timesheets prepared by the employees and approved by supervisors. The unsupported hours reported in the timekeeping system ranged from half an hour to 13.2 hours resulting in unsupported personal service expenditures from the cost pool of $783. Additionally, we noted the controls to ensure required documentation is obtained to support payroll and related costs and maintained to evidence management approval of payroll information were not operating effectively. We also noted adequate internal controls have not been established to ensure the data included in the timekeeping system and used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by DCFS is consistent with the hours reported on manual timesheets prepared by the employees and approved by supervisor. Personal service (payroll and fringe benefit) expenditures and related indirect costs charged to the Foster Care, Adoption Assistance, and TANF programs for the year ended June 30, 2024, were as follows: "See Table in the Audit Report" Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be, among other things, supported by a system of internal control, comply with the established accounting policies and practices of the non-Federal entity, and support the distribution of the employee’s salary or wages amount across specific activities or cost objectives if the employee works on more than one federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure required documentation is obtained to support payroll and related costs and to maintain documentation evidencing management approval of payroll information. Cause: In discussing these conditions with DCFS officials, they stated these exceptions were due to human error and the limitations of keeping a complete file record for the paper-based overtime approval and timesheet process. Possible Asserted Effect: Failure to accurately document and maintain required timesheets results in noncompliance with federal regulations and unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-023) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS review its current procedures and consider any changes necessary to ensure supporting documentation for payroll and related costs is maintained and accurately reflects work performed in accordance with the applicable federal regulations. Views of DCFS Officials: The Department has improved communication with and the training of its timekeepers to ensure accurate and consistent timekeeping standards. The Department has also instituted new quality control procedures to identify and correct errors. All timesheets are digitally archived to ensure proper record retention. The Department is also actively pursuing modernization efforts for both payroll and timekeeping, whether it is e-Time and CMS Payroll or the statewide ERP solutions.
State Agency: Illinois Department of Public Health (IDPH) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: COVID-19 – Immunization Cooperative Agreements (ICA), COVID-19 – Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) ALN and Program Expenditures: 93.268 ($162,117,529), 93.323 ($94,269,102) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-024: Failure to Maintain Documentation to Evidence Timely Reporting of Subaward Information Required by Federally Funded Accountability and Transparency Act (FFATA) Condition Found: IDPH did not maintain documentation to evidence information required to reported by the Federal Funding Accountability and Transparency Act (FFATA) was submitted within required timeframes for awards granted to subrecipients of the Immunization Cooperative Agreements (ICA) and Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) programs. The State is required to report certain key elements related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee Name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing of two and three subrecipients of the ICA and ELC programs (with expenditures of $250,000 and $440,000, respectively), we noted IDPH did not maintain evidence supporting information required by FFATA was submitted within required timeframes. Upon further review, we noted that the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) was decommissioned and replaced with a new reporting system (SAM.gov) effective March 8, 2025. As a result of this system change and the limited historical data transferred between these federal reporting systems, we noted evidence supporting the date information required by FFATA was submitted was not available for FFATA reporting required during the year ended June 30, 2024 for any of IDPH’s subrecipients of the ICA and ELC programs. Additionally, we noted IDPH did not have adequate internal controls in place over FFATA reporting to retain evidence all subawards were reported within required time frames. IDPH’s subrecipient expenditures under its federal programs for the year ended June 30, 2024, were as follows: "See Table in the Audit Report" Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro‑purchase threshold and publish the required information on a public‑facing, OMB‑designated, governmentwide website. Agencies must follow OMB guidance to support Transparency Act implementation. Consistent with the Federal Acquisition Regulation (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. In addition, the OMB Compliance Supplement, dated May 2024, requires the auditor to compare the award information in FSRS to the subaward documents maintained by the recipient to assess if the key data elements were accurately reported and the action was reported in FSRS no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made. Further, 2 CFR 200.303 requires non‑Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to maintain adequate documentation to substantiate information required by FFATA was reported within required timeframes. Cause: In discussing these conditions with IDPH officials, they stated IDPH did not retain documentation from the FSRS system prior to the system being decommissioned. Possible Asserted Effect: Failure to maintain adequate documentation to evidence information required to be reported by FFATA was submitted within required timeframes inhibits the ability of the auditor to perform required compliance testing. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-032. (Finding Code 2024-024, 2023-032, 2022-020, 2021-021). Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDPH establish procedures to maintain documentation to evidence information required by FFATA is reported within required timeframes. Views of IDPH Officials: IDPH agrees the decommission of FSRS.gov and FFATA reporting being transitioned to SAM.gov resulted in evidence of FFATA reporting submission dates being lost.
State Agency: Illinois State Board of Education (ISBE) Federal Agency: U.S. Department of Education (USDE) Program Name: Twenty-First Century Community Learning Centers (21st Century) ALN and Program Expenditures: 84.287 ($61,131,992) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-025: Inadequate Monitoring of 21st Century Subrecipients Condition Found: ISBE did not adequately monitor and document program monitoring procedures performed over subrecipients of the 21st Century Community Learning Centers (21st Century) program. The 21st Century program operates to provide State educational agencies and local educational agencies (LEAs) with funding specific to rural and inner-city public schools. To monitor the 21st Century program activities performed by Illinois elementary and secondary schools, ISBE has established Tier I, Tier II, and Tier III monitoring activities which are applied to each subrecipient (LEA or school district) depending upon the annual risk score determined by ISBE. ISBE’s 21st Century program subrecipient monitoring manual outlines the risk assessment procedures to determine the tier of monitoring required, the methods used for tier determination, and documentation required for each tier of monitoring. Because the size and scope of each subrecipient can vary greatly, ISBE has further subdivided subrecipients into cohorts and sites (individual schools) for purposes of applying certain monitoring procedures. Tier I subrecipient monitoring procedures apply to all subrecipients, with no consideration of the risk assessment score they have received and consist of a twice-a-year call in which ISBE personnel discuss enrollment and registration statistics, progression towards goals specific to the district, and budgetary changes. A notification email is sent twice a year, alerting the subrecipient that a call is required to be scheduled. Once the call is scheduled, a call form detailing the responses to the discussion points is completed by ISBE personnel during the call to evidence the call was conducted and any matters for follow up. documentation provided by the subrecipient to address each portion of review. ISBE documents the completion of its desk review procedures with a letter to the subrecipient communicating any noncompliance and requesting corrective action, if applicable. Any required corrective action plans are reviewed and formally accepted by ISBE in a letter to the subrecipient. Tier III applies to specific subrecipient sites who receive a high-risk assessment score and consists of an on-site review including interviews with the project director and site coordinators, and observations of the academics and academic enrichment taking place at each site. ISBE personnel complete monitoring checklists to evidence the completion of its on-site procedures and a summary checklist is completed after the on-site visit to summarize all areas of noncompliance. A letter is sent to the subrecipient communicating the completion of the on-site review, any noncompliance, and requesting corrective action, if applicable. Any required corrective action plans are reviewed and formally accepted by ISBE in a letter to the subrecipient. During the year ended June 30, 2024, ISBE identified 33 Tier III high-risk subrecipients (with expenditures totaling $36,676,176) which included 47 total subrecipient sites required to have on-site reviews performed. During our testing of seven high risk subrecipient sites selected for testing (related to seven subrecipients with expenditures totaling $15,207,297), we noted ISBE was unable to provide documentation evidencing on-site reviews were performed for five of the subrecipient sites samples. We also noted documentation was not available to evidence the reviews of the other two subrecipient sites sampled were completed as ISBE could not locate documentation of the procedures performed, conclusions reached, or communication of the review results to the subrecipient sites. In addition, we noted ISBE’s internal controls over subrecipient on-site monitoring are not designed at an appropriate level of precision to ensure monitoring of subrecipients is completed, documented, and retained as required by ISBE policies and procedures. ISBE passed through approximately $59,630,722 to 78 subrecipients of the 21st Century program during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(d), a pass-through entity 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 the subaward performance goals are achieved. According to 2 CFR200.332(b), a pass-through entity must evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include establishing supervisory procedures at an appropriate level of precision to ensure adequate monitoring is performed and documentation is maintained. Cause: In discussing these conditions with ISBE officials, they stated the inability to provide required documentation is attributable to staff turnover as those responsible for these monitoring activities have since left ISBE. Possible Asserted Effect: Failure to perform required monitoring procedures and maintain documentation may result in subrecipients not properly administering the Federal programs in accordance with laws, regulations, and grant agreements. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-045. (Finding Code 2024-025, 2023-045) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation:We recommend ISBE establish policies and procedures to ensure programmatic monitoring is performed and appropriately documented. Views of ISBE Officials: Management agrees with the finding and has developed processes and structures to correct it.
State Agency: Illinois State Board of Education (ISBE) Federal Agency: U.S. Department of Education (USDE) Program Name: Education and Stabilization Fund (ESF) ALN and Program Expenditures: 84.425 ($2,176,294,000) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-026: Untimely Review of Subrecipient Performance Reports Condition Found: ISBE did not review subrecipient performance reports in a timely manner according to its program monitoring policies and procedures for subrecipients of the Education and Stabilization Fund - Elementary and Secondary Education (ESF) program for fiscal year 2024. The ESF program operates to provide State educational agencies and local educational agencies with emergency relief funds to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. To monitor the ESF program activities performed by Illinois elementary and secondary schools, ISBE requires a performance report to be prepared on a semi-annual basis. The semi-annual performance report includes information on the accomplishment of deliverables described in the grant, the status of performance measures, and the alignment of accomplishments with spending to date. ISBE’s monitoring policies and procedures require these reports to be reviewed within 14 days of receipt to ensure program activities and program results are consistent with program requirements. During our testing of ESF program performance reports submitted by 41 subrecipients with expenditures of $824,985,617 during the year ended June 30, 2024, we noted performance reports submitted by 19 subrecipients (with expenditures of $777,031,717) were not reviewed by program personnel within 14 days of receipt in accordance with ISBE’s policies. Delayed review of the reports ranged from 1 to 112 past the requirement. "See Table in the Audit Report" ISBE passed through approximately $2,126,841,390 to subrecipients of the ESF program during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include ensuring program procedures and reviews are performed in a timely manner. Cause: In discussing these conditions with ISBE officials, they stated the delays in performing these reviews are attributable to the limited capacity of ISBE monitoring personnel as the responsibilities of existing program monitoring staff were not expanded to accommodate the additional programs. Possible Asserted Effect: Failure to timely review subrecipient semi-annual performance reports may result in untimely identification of subrecipients not properly administering federal program requirements in accordance with laws, regulations, and the grant agreement. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-046. (Finding Code 2024-026, 2023-046). Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ISBE ensure proper review procedures are performed in a timely manner in accordance with its program monitoring policies and procedures. Views of ISBE Officials: We agree with the finding. To ensure proper review procedures are performed in a timely manner in accordance with its program monitoring policies and procedures, the Fiscal department is sending weekly lists of submitted, past due and disapproved Grant Periodic Reports (GPRS) to each applicable department. Program analyzes the GPRS reports and prioritizes reviews based on submission dates. Title Grants Administration department has also trained additional team members to assist with the review process.
State Agency: Illinois State Board of Education (ISBE) Federal Agency: U.S. Department of Education (USDE) Program Name: Education and Stabilization Fund (ESF) ALN and Program Expenditures: 84.425 ($2,176,294,000) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-027: Failure to Report Subaward Information Required by Federally Funded Accountability and Transparency Act (FFATA) Condition Found: ISBE failed to report subaward information required by the Federal Funding Accountability and Transparency Act (FFATA) for awards granted to subrecipients of the Education Stabilization Fund (ESF) program. The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testwork over FFATA reporting, we noted ISBE was required to report information for 73 new subawards issued during the year ended June 30, 2024. In preparing documentation for our audit procedures, ISBE identified FFATA reporting was not completed for seven subawards. Additionally, we noted ISBE did not have adequate internal controls in place over FFATA reporting to ensure all subawards were reported as required. ISBE passed through approximately $2,126,841,390 to subrecipients of the ESF program during the year ended June 30, 2024. Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro-purchase threshold and publish the required information on a public-facing, OMB-designated, governmentwide website and follow OMB guidance to support FFATA implementation. Consistent with the Federal Acquisition Register (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include implementing procedures to ensure all FFATA reports are accurately and timely prepared and submitted in accordance with federal regulations. Cause: In discussing these conditions with ISBE officials, they stated the omission of FFATA reporting was attributable to upload errors in the FFATA Subaward Reporting System (FSRS). ISBE officials also stated that ESF FFATA reporting presented an additional challenge and required additional review and reconciliation compared to the standard FFATA reports submitted for ordinary and customary grants since ESF grants lasted longer than its financial systems were accustomed to. ISBE acknowledged improper data reconciliation of new and old State fiscal year 2024 projects in its financial records. Possible Asserted Effect: Failure to report subaward information in accordance with FFATA results in noncompliance with federal requirements. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-027) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ISBE establish additional procedures and internal controls to ensure all new subawards and amendments subject to FFATA reporting requirements are properly reported in accordance with FFATA. Views of ISBE Officials: ISBE agrees with the finding. When a grant runs longer than its financial systems are accustomed to (two state fiscal years), management in the Department of Funding and Disbursements will maintain and present a list of grants previously approved and reported to FFATA to the principal consultant responsible for FFATA reporting, ensuring the principal consultant has the necessary tools to properly reconcile grants that have previously been reported and those that have not. Then, management will review the list of subrecipient projects prepared by the principal consultant for submission to ensure accuracy prior to the data being reported in SAM.gov, which has replaced FSRS.
State Agency: Illinois Student Assistance Commission (ISAC) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Child Care and Development Fund (CCDF) Cluster ALN and Program Expenditures: 93.575/93.596 ($747,612,292) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: None Finding 2024-028: Inaccurate Reporting of Federal Expenditures Condition Found: ISAC did not accurately report Federal expenditures, including amounts passed-through to subrecipients, under the CCDF Cluster. Federal expenditures, including amounts provided to subrecipients, reported to the Illinois Office of Comptroller (IOC) which were used to prepare the schedule of expenditure of federal awards (SEFA), did not agree to ISAC’s financial records provided for audit. Specifically, we noted the following differences between amounts provided for audit by ISAC and the amounts passed through to subrecipients of the CCDF Cluster program reported to the IOC for the SEFA for the year ended June 30, 2024: "See Table in the Audit Report" Finally, we noted ISAC’s controls over reporting federal expenditures, including amounts passed-through to subrecipients, were not designed at a sufficient level of precision to ensure complete and accurate reporting in a timely manner. Criteria or Requirement: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Among other things required by 2 CFR 200.510(b), the SEFA must include the total amount provided to subrecipients from each Federal program.Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures, including amounts passed-through to subrecipients, are accurately reported on the SEFA and to other State agencies, where applicable. Cause: In discussing these conditions with ISAC management, they stated they presented these beneficiary payments as amounts passed through to subrecipients in accordance with guidance provided by parties responsible for the State’s financial reporting process. Possible Asserted Effect: Failure to accurately report federal expenditures impedes the completion of an audit in accordance with the Uniform Guidance which may result in the suspension of federal funding. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-028) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ISAC establish procedures to accurately report federal expenditures (including subrecipient expenditures) used to prepare the SEFA to the IOC. Views of ISAC Officials: ISAC accepts the finding. During the year ended June 30, 2024, payments totaling $79,103,694 were made to educational institutions for the direct benefit of eligible beneficiaries, as reflected in ISAC’s internal accounting records for the same fiscal year. ISAC believes federal expenditures were appropriately made to beneficiaries who were determined to have qualified under the program and that the amount of the total expenditures was correct. The classification of these amounts on the SEFA for the year ended June 30, 2024, was done using the same methodology applied in the prior fiscal year based on reporting guidance received for that fiscal year. ISAC maintained the established reporting framework, in preparing the SEFA for the fiscal year ended June 30, 2024. ISAC agrees that the amounts should not have been reported as payments to subrecipients on the SEFA for the fiscal year ended June 30, 2024. ISAC continues to maintain adequate internal controls designed to ensure federal expenditures are accurately recorded in its accounting records and are properly presented in accordance with the applicable guidance within 2 CFR 200.
State Agency: Illinois Community College Board (ICCB) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Child Care and Development Fund (CCDF) Cluster ALN and Program Expenditures: 93.575/93.596 ($747,612,292) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-029: Failure to Report Subaward Information Required by FFATA Condition Found: ICCB failed to report information required by the Federal Funding Accountability and Transparency Act (FFATA) for awards granted to subrecipients of the CCDF Cluster (CCDF). The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee Name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, six subaward amendments (totaling $4,487,676) we noted FFATA reporting was not completed for any of the subawards sampled. Upon additional review, we noted ICCB did not complete FFATA reporting for any of its CCDF subawards during the year ended June 30, 2024. We also noted ICCB did not establish adequate control procedures to ensure FFATA reports were properly completed for all subawards as required by federal regulations. ICCB’s subrecipient expenditures under the CCDF Cluster for the year ended June 30, 2024 were $19,843,035. Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro-purchase threshold and publish the required information on a public-facing, OMB-designated, government-wide website and follow OMB guidance to support Transparency Act implementation. Consistent with the Federal Acquisition Register (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures designed to ensure FFATA reporting is completed in accordance with federal requirements. Cause: In discussing these conditions with ICCB officials, they noted FFATA reporting responsibilities were not clearly assigned within the agency during the fiscal year. As a result, subaward amendments were executed without corresponding FFATA reporting submissions in the designated reporting system. Possible Asserted Effect: Failure to identify awards subject to FFATA and to report subawards in accordance with FFATA results in noncompliance with federal requirements. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-029) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICCB establish procedures to identify awards subject to FFATA reporting requirements and establish internal controls to report required subaward information. Views of ICCB Officials: ICCB concurs with the finding.
State Agency: Illinois Department of Employment Security (IDES) Federal Agency: U.S. Department of Labor (USDOL) Program Name: Unemployment Insurance Program ALN and Program Expenditures: 17.225 ($2,329,354,603) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $2,335,092 Compliance Requirement: Eligibility Finding 2024-030: Unemployment Benefit Payments to Ineligible Claimants Condition Found: IDES failed to follow established policies when making eligibility determinations for claimants of the Unemployment Insurance (UI) program. The UI program administered by IDES provides benefits to eligible individuals that are unemployed and able and available to work. IDES utilizes the Illinois Benefits Information System (IBIS) to perform and document claimant eligibility determinations, to process claims for unemployment insurance benefits, and to assist IDES in complying with the requirements of the Illinois UI Act, rules, policies, and procedures applicable to unemployment benefits. UI program eligibility requirements include, among other criteria, the following: • The individual is unemployed through no fault of their own • The individual must register with IDES employment service system IllinoisJobLink.com • The individual has been paid $1,600 or more in wages during a recent 12-month period • The individual has earned at least $400 outside of the base period quarter in which his/her earnings were the highest • The individual must be actively seeking employment and be available to work • The individual must not refuse an offer of suitable work To be eligible to receive UI benefits, a claimant completes an application either online, in-person, or over the phone. Claimant applications are processed by the IBIS system which includes a number of edit checks which must be passed in order for a claimant to be eligible to receive UI benefits. However, because of the volume of claims and suspension of certain requirements during the pandemic public health emergency, we noted IDES had disabled certain edit checks in IBIS to allow claims to process and failed to re-establish the edit checks with the conclusion of the public health emergency provisions. As a result, certain ineligible claimants were identified during our assessment of eligibility. Specifically, we noted the following exceptions: • 135 claimants were inappropriately determined to be eligible for UI benefits when the individuals should have been flagged as ineligible as the claimants were terminated from previous employment with cause, which is a disqualifying requirement. UI benefits paid to this group of claimants were $821,715. • 73 claimants were inappropriately determined to be eligible for UI benefits when the individuals should have been flagged as ineligible as the claimants voluntarily left work without cause, which is a disqualifying requirement. UI benefits paid to this group of claimants were $259,485. • 248 claimants were inappropriately determined to be eligible for UI benefits when the individuals should have been flagged as ineligible as the claimants were offered suitable work, but refused employment, which is a disqualifying requirement. UI benefits paid to this group of claimants were $1,253,892. Additionally, we noted adequate internal controls have not been established to ensure necessary changes resulting from the conclusion of pandemic related provisions are made to UI eligibility procedures in a timely manner. Benefits paid to UI claimants totaled $2,149,469,000 during the year ended June 30, 2024. Criteria or Requirement: According to the State of Illinois Unemployment Insurance Law Handbook, an individual who is discharged for misconduct with his work is ineligible for benefits for the week in which he was discharged for misconduct and thereafter until the individual has become re-employed and has had earnings equal to or in excess of their weekly benefit amount in each of four calendar weeks. Further, an individual will be ineligible for benefits if the individual has failed, without good cause, to accept suitable work when offered by the Department of Employment Security or an employing unit (i.e. business). In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure eligibility determinations are made in accordance with the UI Act. Cause: In discussing these conditions with IDES officials, they stated these conditions occurred as the result of competing priorities with limited resources. Possible Asserted Effect: Failure to follow established policies to determine beneficiary eligibility may result in noncompliance with program regulations and payments to ineligible recipients. Repeat Finding: A similar finding was reported in the prior year as finding number 2023-038. (Finding Code 2024-030, 2023-038) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDES review its current procedures and consider any changes necessary to ensure eligibility determinations are made in accordance with internal policy and federal regulations. Views of IDES Officials: IDES accepts the recommendation and has reviewed and updated procedures and training to improve controls over eligibility determinations relative to this finding.
State Agency: Illinois Department of Employment Security (IDES) Federal Agency: U.S. Department of Labor (USDOL) Program Name: Unemployment Insurance Program ALN and Program Expenditures: 17.225 ($2,329,354,603) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-031: Inadequate Process for Preparing ETA 9130 Financial Reports Condition Found: IDES does not have an adequate process in place to ensure that the ETA 9130 financial reports prepared for the Unemployment Insurance (UI) program are complete and accurate. On a quarterly basis, IDES is required to report program and administrative expenditure information for each grant award which they operate, including standard program and pilot, demonstration, and evaluation projects, on the ETA 9130, Financial Status Report, UI Programs. Financial data is required to be reported cumulatively from grant inception through the end of each reporting period. During our test work of 60 ETA 9130 reports covering the September 2023 and March 2024 quarters, we noted certain grant awards had inaccurate amounts reported for key line items for the September 30, 2023, and March 31, 2024 reporting quarters. Specifically, we noted IDES inaccurately reported the following line items: "See Table in the Audit Report" We also noted IDES does not perform analytical or other procedures over previously reported information or expectations relative to current program activities. Additionally, supervisory review procedures are not designed to operate at a level of precision to identify errors of this nature. Criteria or Requirement: According to OMB Number 1205-0461, IDES is responsible for submitting a quarterly ETA 9130 report at the completion of each quarter. Each quarter should correspond to the following calendar quarter dates: March 31, June 30, September 30, and December 31. Additionally, the primary contact person, the designated authorized official in the recipient’s organization, is responsible for certifying the accuracy of the data reported to the USDOL. In addition, 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal control should include procedures to ensure the completeness and accuracy of information reported in required financial reports. Cause: In discussing these conditions with IDES officials, they stated the incorrect amounts submitted for the September 30, 2023 and March 31, 2024 quarterly reports were due to data entry errors. Possible Asserted Effect: Failure to prepare accurate ETA 9130 reports may inhibit the USDOL from effectively monitoring the UI program. Repeat Finding: A similar finding was reported in prior year audit as finding 2023-040. (Finding Code 2024-031, 2023-040, 2022-026) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDES review its procedures for preparing ETA 9130 financial reports required for the UI program and implement analytical and any other procedures considered necessary to ensure the reports are complete and accurate prior to submission to the USDOL. Views of IDES Officials: IDES accepts the audit finding and will work to ensure the ETA 9130 financial reports are complete and accurate by prioritizing the hiring of additional staff, reviewing procedures, looking for ways to strengthen internal controls and continuing conversation with DoIT about improving and/or modernizing reporting tools.
State Agency: Illinois Department of Employment Security (IDES) Federal Agency: U.S. Department of Labor (USDOL) Program Name: Unemployment Insurance Program ALN and Program Expenditures: 17.225 ($2,329,654,603) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-032: Inadequate Process for Preparing ETA 2208A Special Report Condition Found: IDES does not have an adequate process in place to ensure the ETA 2208A special reports prepared for the Unemployment Insurance (UI) program are complete and accurate. On a quarterly basis, IDES is required to report information on staff years worked and paid by program category on the ETA 2208A – Quarterly UI Above-Base (ETA 2208A) report. The information required to be reported includes UI program staff year usage (Section A), regular contingency entitlement certification (Section B), trade above-base entitlement certification (Section C), and additional benefits above-base entitlement certification (Section D). Key line items required for testing include items one through seven in Section A. IDES has implemented procedures whereby IDES program staff prepare the quarterly reports and a supervisor reviews and approves the report prior to submission to the USDOL. During our testwork of two quarterly ETA 2208A reports, we noted IDES was unable to provide evidence a supervisor reviewed and approved the December 31, 2023 and the March 31, 2024 reports prior to submission to the USDOL. As a result, we were unable to determine if a supervisory review was performed and whether the duties of preparing and reviewing the report were appropriately segregated. Criteria or Requirement: 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal control should include procedures to ensure supervisory reviews of required special reports are completed and documented prior to submission to the USDOL. Cause: In discussing these conditions with IDES officials, they stated the lack of evidence of review and errors were due to IDES personnel not properly documenting approval of the special reports prior to submission to the USDOL. This issue was exacerbated by staff turnover and hiring delays. Possible Asserted Effect: Failure to follow established reporting controls may result in inaccurate reports which prevents the USDOL from effectively monitoring the UI program. Repeat Finding: A similar finding was reported in prior year audit as finding number 2023-041. (Finding Code 2024-032, 2023-041, 2022-028, 2021-032) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDES ensure supervisory reviews of special reports prior to submission to the USDOL are documented in accordance with its established policies and procedures. Views of IDES Officials: IDES accepts the finding. It has been reviewed and corrected.
State Agency: Illinois Department of Employment Security (IDES) Federal Agency: U.S. Department of Labor (USDOL) Program Name: Unemployment Insurance Program ALN and Program Expenditures: 17.225 ($2,329,354,603) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: None Finding 2024-033: Inaccurate Reporting of Federal Expenditures Condition Found: IDES did not accurately report Federal expenditures under the Unemployment Insurance (UI) program. Federal expenditures reported to the Illinois Office of Comptroller (IOC) which were used to prepare the schedule of expenditure of federal awards (SEFA) did not agree to IDES’s financial records provided for audit. Specifically, we noted the following difference between amounts provided for audit by IDES and the SEFA amounts reported to the IOC for the Unemployment Insurance program for the year ended June 30, 2024: "See Table in the Audit Report" Finally, we noted IDES’s controls over reporting federal expenditures were not designed at a sufficient level of precision to ensure complete and accurate reporting in a timely manner. Criteria or Requirement: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately reported on the SEFA. Cause: In discussing these conditions with IDES officials, they stated the cause of the difference was the result of a large audit adjustment related to return of debit cards from a third party bank who sopped serving the program in December 2021. Possible Asserted Effect: Failure to accurately report federal expenditures inhibits the completion of an audit in accordance with the Uniform Guidance which may result in the suspension of federal funding. Repeat Finding: A similar finding was reported in prior year audit as finding number 2023-042. (Finding Code 2024-033, 2023-042) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDES establish procedures to accurately report federal expenditure used to prepare the SEFA to the IOC. Views of IDES Officials: The Agency accepts the recommendation and will adjust for returned debit cards in accordance with the final resolution determined in consultation with the Comptroller and financial statement auditors for State fiscal year 2024 if this situation should arise again.
State Agency: Illinois Department of Commerce and Economic Opportunity (DCEO) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Low-Income Home Energy Assistance (LIHEAP) ALN and Program Expenditures: 93.568 ($205,171,791) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Cash Management Finding 2024-034: Failure to Re-certify to the Accuracy of the Clearance Pattern Condition Found: DCEO did not properly review or re-certify the accuracy of the clearance pattern specified in the Treasury-State Agreement related to cash draws for the Low-Income Home Energy Assistance Program (LIHEAP). Annually, the State of Illinois negotiates the Treasury-State Agreement (TSA) with the U.S. Department of the Treasury (the Treasury) which details the funding techniques used for the draw down of federal funds. Certain approved finding techniques utilized by the State require the use of a clearance pattern that identifies the average number of days disbursements (warrants) take to clear the State Treasurer’s account. The established clearance pattern is then used to determine the date the State should request federal funds from the U.S. Treasury in order to minimize the time elapsing between the receipt of federal funds and the State Treasurer’s clearance of funds. The clearance pattern must be recertified at least every five years. During our testwork over cash management requirements, we noted the clearance pattern included in the TSA in place for the year ended June 30, 2024 had not been recertified since 2016 (more than 5 years since previous recertification). Additionally, we noted internal controls have not been established to ensure clearance patterns are calculated and recertified in accordance with Treasury regulations. Criteria or Requirement: 31 CFR 205.20 requires a State to ensure that a clearance pattern accurately represents the flow of Federal funds under the Federal assistance programs to which it is applied, and that a clearance pattern reflects seasonal or other periodic variations in clearance activity. A State shall also ensure that a clearance pattern is auditable. 31 CFR 205.22 states an authorized State official shall recertify that a clearance pattern corresponds to a program’s clearance activity and shall recertify the accuracy of the clearance pattern at least every five years. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include implementing procedures to ensure clearance patterns are recertified in accordance with federal regulations. Cause: In discussing these conditions with DCEO officials, they stated they did not have procedures in place to re-certify the clearance pattern every 5 years as required due to unfamiliarity with the requirements. Possible Asserted Effect: Failure to evaluate and recertify a program’s clearance pattern violates the requirement of 31 CFR 205.9 and could result in the inaccurate recalculation of DCEO’s interest obligation to the Treasury. Repeat Finding: A similar finding was reported in the prior year audit and finding number 2023-027. (Finding Code 2024-034, 2023-027) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCEO establish procedures and controls to ensure clearance patterns are recertified within required timeframes. Views of DCEO Officials: DCEO agrees with this finding.
State Agency: Illinois Department of Commerce and Economic Opportunity (DCEO) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Low-Income Home Energy Assistance (LIHEAP) ALN and Program Expenditures: 93.568 ($205,171,791) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Cash Management Finding 2024-035: Failure to Perform Cash Draws in Accordance with the Treasury State Agreement Condition Found: DCEO did not perform its cash draws in accordance with the funding technique prescribed in the Treasury State Agreement (TSA). On an annual basis, the State of Illinois negotiates the TSA with the U.S. Department of the Treasury (the Treasury), which details, among other things, the funding techniques to be used for requesting federal funds. The TSA funding technique prescribed for the Low Income Home Energy Assistance Program (LIHEAP) program is interest neutral and requires DCEO to request funds from the awarding federal agency so that the funds are deposited by ACH on the dollar weighted average day of clearance for disbursements. According to the 2024 TSA, the average day of clearance for program costs is three days. As such, under this funding technique, DCEO should request federal funds two days after issuing warrants (payments) for program expenditures. During our testwork over 15 cash draws (totaling $67,855,621) for program (subrecipient) expenditures of the LIHEAP program during the year ended June 30, 2024, we noted the expenditures supporting the cash draws were not disbursed in accordance with the timeframe required by the prescribed funding technique. During our testing of 40 subrecipient payments (totaling $9,991,994), we noted federal funds were requested 1 to 5 days earlier than permitted by the funding technique (totaling $1,859,216). Additionally, we noted internal controls have not been established to ensure cash draws are calculated and recertified in accordance with Treasury regulations and the funding technique prescribed by the TSA. Criteria or Requirement: According to 31 CFR part 205.6(a), a TSA documents the accepted funding techniques and methods for calculating interest agreed upon by the U.S. Treasury and the State for each Federal program governed by subpart A of the Treasury regulations. Section 6.3.2 of the 2024 Treasury State Agreement (effective July 1, 2023 to June 30, 2024) states that the Low-Income Home Energy Assistance program is required to use the Average Clearance funding technique. Section 6.2.1 of the 2024 Treasury State Agreement describes the Average Clearance funding technique as being interest neutral and requiring the State to request funds such that they are deposited by ACH on the dollar-weighted average day of clearance for the disbursement. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure that Federal cash draws are performed in accordance with the TSA. Cause: In discussing these conditions with DCEO officials, DCEO did not have the correct funding technique listed within the Treasury-State Agreement for the Low-Income Home Energy Assistance Program. Possible Asserted Effect: Failure to draw funds in accordance with the TSA results in noncompliance with U.S. Treasury regulations. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-028. (Finding Code 2024-035, 2023-028) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCEO implement procedures to ensure cash draws are performed in accordance with the TSA or work with the US Treasury to amend the TSA to reflect DCEO cash draw request practices. Views of DCEO Officials: DCEO agrees with this finding.
State Agency: Illinois Department of Commerce and Economic Opportunity (DCEO) Federal Agency: U.S. Department of Labor (USDOL) U.S. Department of Health and Human Services (USDHHS) Program Name: WIOA Cluster, Low-Income Home Energy Assistance (LIHEAP) ALN and Program Expenditures: 17.258/17.259/17.278 ($142,310,788), 93.568 ($205,171,791) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-036: Failure to Maintain Updated Procedures to File Subaward Information Required by FFATA Condition Found: DCEO failed to maintain updated procedures which resulted in filing inaccurate Federal Funding Accountability and Transparency Act (FFATA) reports. The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee Name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During State fiscal year 2024, DCEO did not have updated procedures in place to identify and report the following key data elements, for each of the programs: "See Table in the Audit Report" Additionally, we noted DCEO did not have adequate internal controls in place over FFATA reporting to ensure all subawards were reported as required. DCEO passed through approximately $198,786,849 and $124,406,438 to subrecipients of the LIHEAP and WIOA programs, respectively, during the year ended June 30, 2024. Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro-purchase threshold and publish the required information on a public-facing, OMB-designated, governmentwide website and follow OMB guidance to support Transparency Act implementation. Consistent with the Federal Acquisition Register (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include implementing procedures to ensure all FFATA reports are accurately and timely prepared and submitted in accordance with federal regulations. Cause: In discussing these conditions with DCEO officials, they stated the department’s procedures did not reflect a requirement to re-file a FFATA report after a sub-award agreement had its dollar amount modified. In addition, because the department’s procedures presumed that the obligation date of a subaward was interchangeable with the award date for a subaward, FFATA reports were filed based on when a sub-award was obligated. Possible Asserted Effect: Failure to maintain updated reporting procedures in accordance with FFATA results in noncompliance with federal requirements. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-029. (Finding Code 2024-036, 2023-029) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCEO update procedures and controls to identify awards and amendments subject to FFATA reporting requirements and report required subaward information in accordance with FFATA. Views of DCEO Officials: DCEO agrees with the finding and recommendations.
State Agency: Illinois Department of Commerce and Economic Opportunity (DCEO) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Low-Income Home Energy Assistance (LIHEAP) ALN and Program Expenditures: 93.568 ($205,171,791) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-037: Inaccurate Special Report Condition Found: DCEO did not prepare accurate special reports for the Low-Income Home Energy Assistance Program (LIHEAP). DCEO is required to prepare Quarterly Performance and Management Reports for LIHEAP. During our testwork over two Quarterly Performance and Management Reports submitted during the fiscal year ended June 30, 2024, we noted for the quarterly report for the period ending June 30, 2024, the amount of funds obligated was reported as $110,510,629. The actual amount of funds obligated was $109,882,656, resulting in an overstatement of $627,973. Additionally, we noted DCEO has not established appropriate internal controls to ensure its quarterly reports submitted to USDHHS are accurate in accordance with federal requirements. We also noted supervisory review procedures have not been designed to operate at a level of precision to identify errors of the size and nature noted above. Criteria or Requirement:According to the Administration for Children and Families Action Transmittal LIHEAP-AT-2024-02, the Quarterly Performance and Management Report is conducted in accordance with the LIHEAP statute (Title XXVI of P.L. 97-35). The information received from the report provides data to the Administration for Children and Families and Congress in its oversight of recipients’ performance in administering the LIHEAP program. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include controls to ensure amounts reported in the Quarterly Performance and Management Report are accurate. Cause: In discussing these conditions with DCEO officials, they stated the incorrect amounts submitted for the June 30, 2024 quarterly report was due to a data entry error not detected by supervisory review procedures Possible Asserted Effect: Failure to accurately prepare the quarterly performance and management reports inhibits the completion of the audit and may prevent USDHHS from obtaining accurate program data for monitoring the LIHEAP program. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-031. (Finding Code 2024-037, 2023-031) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCEO review the process and procedures in place to prepare special reports required for the LIHEAP program and implement procedures necessary to ensure the reports submitted to USDHHS are accurate. Views of DCEO Officials: DCEO agrees with the finding and recommendation. Due to the timing of field work of the 2023 audit, the quarterly report identified in this finding was submitted prior to the identification of the prior year finding.
State Agency: Illinois Department of Transportation (IDOT) Federal Agency: U.S. Department of Transportation (USDOT) Program Name: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP) ALN and Program Expenditures: 20.106 ($86,526,057) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Finding 2024-038: Failure to Follow Established Control Procedures for Obtaining Certified Payrolls for the Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP) Condition Found: IDOT did not document approval of certified payrolls in accordance with its established internal control procedures for the Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP). Non-federal entities are required to comply with the requirements of the Davis-Bacon Act and the Department of Labor regulations applicable to contracts governing federally financed and assisted construction. These regulations require, in part, that all laborers and mechanics employed by contractors or subcontractors who work on construction contracts in excess of $2,000 financed by Federal assistance funds must be paid prevailing wage rates established for the locality of the project. Each subcontractor subject to the Wage Rate Requirement (formally known as the Davis-Bacon Act) must submit payrolls on a weekly basis and include a signed certification that they have complied with the prevailing wage rates. The resident engineer on the construction site is required to keep a log of contractors and monitor payroll submission. These logs are reviewed by the resident engineer, which indicates that the certified payrolls for that period have been received and meet IDOT’s program requirements. During our testwork of 51 AIP contractor payments for construction projects managed by subrecipients (totaling $18,632,822), we noted that the certified payrolls for 3 AIP contractor payments on construction projects managed by subrecipients (totaling $440,232) did not contain documentation of approval by an IDOT resident engineer. Payments made to subrecipients for construction contracts under the Airport Improvement Program were $38,125,279 during the year ended June 30, 2024. Total payments made to subrecipients under the Airport Improvement Program were $86,237,740 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures in place to ensure certified payrolls are reviewed with proper documentation of resident engineer approval. Cause: In discussing these conditions with IDOT officials, IDOT stated continued staffing turnover, staffing shortages, and shifts in responsibility for oversight between relevant sections/bureaus as such contributed to this finding. Possible Asserted Effect: Failure to approve certified payrolls in line with IDOT’s established control procedures could result in contractors not paying the prevailing wage rate to employees. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code: 2024-038) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOT review its current process and consider any changes necessary to ensure weekly payroll certifications are reviewed and approved in accordance with federal requirements and IDOT’s procedures. Views of IDOT Officials: IDOT agrees with the finding and recommendation. IDOT would like to note that even though the full program title includes “COVID-19 Airport Programs”, this specific issue does not relate to any of the COVID-19 funding sources. COVID-19 funding was not largely utilized by airports for capital projects and the issue noted in this finding relates to capital projects.
State Agency: Illinois Department of Transportation (IDOT) Federal Agency: U.S. Department of Transportation Program Name: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP) ALN and Program Expenditures: 20.106 ($86,526,057) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-039: Failure to Report Subaward Information Required by FFATA Condition Found: IDOT failed to report information required by the Federal Funding Accountability and Transparency Act (FFATA) for awards granted to subrecipients of the Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP). The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee Name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers IDOT passed through approximately $86,237,740 to subrecipients of the AIP during the year ended June 30, 2024. Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro-purchase threshold and publish the required information on a public-facing, OMB-designated, governmentwide website and follow OMB guidance to support Transparency Act implementation. Consistent with the Federal Acquisition Regulation (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include complying with FFATA. Cause: In discussing these conditions with IDOT officials, IDOT stated missing FFATA reporting was due to staffing transition combined with a lack of appropriate staffing resources. Possible Asserted Effect: Failure to identify awards subject to FFATA and to report subaward in accordance with FFATA results in noncompliance with federal requirements. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-043. (Finding Code 2024-039, 2023-043, 2022-029, 2021-036). Recommendation: We recommend IDOT establish procedures to identify awards subject to FFATA reporting requirements and report required subaward information in accordance with FFATA. Views of IDOT Officials: IDOT agrees with this finding.
State Agency: Illinois Department of Transportation (IDOT) Federal Agency: U.S. Department of Transportation Program Name: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP) ALN and Program Expenditures: 20.106 ($86,526,057) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-040: Inaccurate Information Included in the Financial Reports Condition Found: IDOT did not prepare accurate federal financial status reports for the Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP). IDOT is required to prepare a federal financial status report (SF-425) submitted annually for each open grant, due 90 days after the end of each Federal Aviation Administration’s (FAA) fiscal year, by sponsors to monitor outlays and program income on a cash or accrual basis. In addition, this report must be submitted as a final financial report during grant closeout. Further, IDOT is required to submit an Outlay Report and Request for Reimbursement for Construction Program (SF-271) for each construction project, due 90 days after the end of the FAA’s fiscal year, by sponsors to summarize requests for reimbursements. This report must also be submitted as a final financial report during closeout. During our testwork over the annual SF-425 and related SF-271 reports submitted for the federal fiscal year ended September 30, 2023, we noted the following errors: "See Table in the Audit Report" We further noted the supervisory review procedures performed for this report were not at an appropriate level of precision to identify the errors identified in our testing. Additionally, IDOT does not perform analytical procedures to identify potential errors or unusual fluctuations in reported amounts. Criteria or Requirement: According to the SF-425 report Box 13 for certification, recipients of AIP grants must submit true, complete, and accurate information on the SF-425 reports. Further, according to the SF-271 report Box 12 for certification, recipients of AIP grants must certify that the billed costs or disbursements reported are in accordance with the terms of the project and that the reimbursement represents the Federal share due which has not been previously requested and that all work is in accordance with the terms of the award. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure information reported in required financial reports is accurate. Cause: In discussing these conditions with IDOT officials, IDOT stated the preparation of the reports is a manual process and the difference was due to human error. Possible Asserted Effect: Failure to accurately prepare financial reports prevents USDOT from effectively monitoring the Airport Improvement Program. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-044. (Finding Code 2024-040, 2023-044) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOT review the process and procedures in place to prepare financial status reports required for the Airport Improvement Program and implement the additional procedures necessary to ensure the reports are complete, accurate, and agree or reconcile to its financial records. Views of IDOT Officials: IDOT agrees with this finding.
State Agency: Illinois Department of Transportation (IDOT) Federal Agency: U.S. Department of Transportation Program Name: Highway Planning and Construction (HPC) Program ALN and Program Expenditures: 20.205 ($2,192,857,212) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-041: Failure to Communicate Award Information to Subrecipients Condition Found: IDOT did not follow its established policies and procedures for monitoring subrecipients of the Highway Planning and Construction program. During our testwork of the award communications for our sample of subrecipients, we selected the contracts under which funds were disbursed during fiscal year 2024 to review for compliance with federal award communication requirements. During our review of the award communication files for a sample of 30 awards (related to subrecipient expenditures of $46,016,588), we noted the following information was not communicated in the subrecipient award agreement for three subrecipients sampled (with payments totaling $742,559): • Federal Award Identification Number (FAIN) • Assistance Listing Number (ALN) • Subaward Period of Performance Start and End Date • Subrecipient’s Unique Entity Identifier Amounts passed through to subrecipients under the Highway Planning and Construction program totaled $94,970,638 during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(a), a pass-through entity is required to identify Federal awards made to the subrecipient by informing each subrecipient of required information. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include controls to ensure required information is properly communicated. Cause: In discussing these conditions with IDOT officials, they stated there are two separate causes for this finding. For two of the agreements, the FAIN and ALN were overlooked when drafting the agreement. In these instances, it was employee oversight. For the final agreement noted, elements were missing from the template at that time, and IDOT was unaware of any requirements to have the CFDA# (ALN), DUNS number (UEI), or single audit included in the agreement as it was executed in 2002. Possible Asserted Effect: Failure to communicate required award information may result in subrecipients not properly administering the Federal programs in accordance with laws, regulations, and the grant agreement. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-041) Recommendation: We recommend IDOT implement additional procedures to ensure award information communicated to subrecipients is reviewed for completeness and accuracy. Views of IDOT Officials: IDOT agrees with the finding.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-042: Failure to Adequately Monitor Subrecipients Condition Found: ICJIA did not follow its established program monitoring policies and procedures for subrecipients of the Crime Victim Assistance (CVA) program during fiscal year 2024. ICJIA selects subrecipients of the CVA program to perform programmatic monitoring procedures using a risk-based approach. Among other things, ICJIA has identified subrecipients receiving CVA funding under shorter term programs (12 months or less in duration) as higher risk and requires an on-site review to be performed once during the period of performance. Additionally, longer term programs (12 to 36 months in duration) require an on-site review in the first twelve months of the period of performance and a second on-site review during the remaining period of performance. In scheduling the timing of its on-site reviews, ICJIA considers whether there are any additional subrecipient specific risk factors that warrant an earlier review time. Based upon ICJIA’s monitoring criteria, we noted ICJIA should have conducted site visits for 51 subrecipients (with expenditures totaling $26,561,276) from longer term programs during the year ended June 30, 2024. During our review of the subrecipient site visits conducted during State fiscal year 2024, we noted 14 of the 51 subrecipients from longer term programs (with expenditures of $4,215,392 during the year ended June 30, 2024) were not subjected to site visits. Additionally, we noted three of the 51 reviews required to be performed during the year ended June 30, 2024 were not performed within the required time period. Specifically, we noted reviews for three subrecipients (with expenditures of $659,442) were performed 19 to 21 days late. ICJIA passed through $50,412,108 to subrecipients of the CVA program during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(e), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. ICJIA’s Site Visits policy requires Grant Specialists to conduct two site visits within thirty-six months of the start of a grant with the first site visit taking place within the first twelve months, unless the grantee’s Program Risk Assessment requires that a site visit be completed within a shorter time period. In addition, 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include ensuring on-site program monitoring procedures are performed in a timely manner. Cause: In discussing these conditions with ICJIA officials, they stated due to staffing shortages within the federal and state grants unit, all of the required visits were not completed. Possible Asserted Effect: Failure to adequately perform on-site monitoring reviews of subrecipients may result in subrecipients not properly administering the Federal programs in accordance with laws, regulations, and the grant agreement. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-033. (Finding Code 2024-042, 2023-033) Recommendation: We recommend ICJIA ensure programmatic on-site reviews are performed and documented for subrecipients in accordance with established policies and procedures. Views of ICJIA Officials: ICJIA acknowledges that these gaps in documentation and consistency contributed to the finding and has taken corrective actions to strengthen monitoring procedures, enhance documentation standards, and ensure timely follow-up with subrecipients.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-043: Inadequate Review of Subrecipient Single Audit Reports Condition Found: ICJIA did not adequately review single audit reports received from its subrecipients for the Crime Victim Assistance Program (CVA) program on a timely basis. The State of Illinois established the Grant Accountability and Transparency Unit (GATU) to implement the provisions of the State’s Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal and State programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submit their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. As a State agency, ICJIA is responsible for reviewing the reports assigned to them by GATU and determining whether Federal funds reported in the consolidated year-end financial report (CYEFR) reconcile to ICJIA records. Additionally, as the cognizant State agency, ICJIA is responsible for issuing management decisions on findings reported and applying sanctions to subrecipients who do not comply with reporting requirements (i.e. stop pay process). During our testing of a sample of single audit desk review files for 14 subrecipients (with expenditures of $37,884,972 in the fiscal year), we noted the following: • For five subrecipients (with expenditures totaling $19,501,158), ICJIA did not issue a management decision letter in a timely manner. The delays in issuing management decision letters ranged from 61 to 128 days beyond the required timeframe. • For 11 subrecipients (with expenditures totaling $24,680,412), ICJIA did not reconcile the CYEFR to ICJIA’s records as required. As of the date we communicated our findings to ICJIA (January 27, 2026), ICJIA had still not reconciled the CYEFR to ICJIA’s records for 10 subrecipients (with expenditures totaling $24,097,663). • For one subrecipient (with expenditures of $295,572), the subrecipient single audit reporting package was not submitted within the required timeframe, and ICJIA did not follow up with the subrecipient or invoke the stop pay process. ICJIA has not established controls over subrecipient single audit reviews at an adequate level of precision to ensure single audit reporting requirements, including obtaining and reviewing single audit reporting packages, issuing management decision letters, reconciling CYEFRs to agency records, and invoking stop payment actions, are performed within required timeframes. ICJIA passed through $50,412,108 to subrecipients of the CVA program during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(e), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statues, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(e)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. In addition, 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with ICJIA officials, they stated this GATA responsibility has not been performed as consistently as other responsibilities due to competing priorities and staff shortages. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations, and the grant agreement. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-034. (Finding Code 2024-043, 2023-034) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICJIA establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, ICJIA should implement procedures to ensure timely reconciliation of funds, issuance of management decision letters, and initiation of the stop pay process. Views of ICJIA Officials: ICJIA agrees with the finding and the cause. Staffing continues to be a priority for resolving the single audit review process.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-044: Inadequate Fiscal Monitoring of Subrecipients Condition Found: ICJIA did not follow its established policies and procedures for monitoring subrecipients of the Crime Victim Assistance (CVA) program. ICJIA selects subrecipients of the CVA program over which to perform fiscal monitoring procedures using a risk-based approach. Specifically, a risk assessment is performed annually over the subrecipient, which includes calculating a risk score based upon criteria established by ICJIA. ICJIA’s risk assessment criteria include the total award amount, the subgrantee’s experience with ICJIA grant awards, results of financial monitoring, the percentage of grant expended to date, the quality of financial submissions, the timeliness of financial submissions, and the payment type. Based upon the risk score, each subrecipient is designated as needing high, moderate, or low oversight. The oversight category assigned determines the frequency and type of financial monitoring (i.e. desk review or fiscal audit). During our audit procedures, we noted three CVA subrecipients (with expenditures of $582,277) were designated for high oversight and did not have a fiscal audit performed over their CVA program grants. Agency personnel indicated additional risk assessment criteria were considered to reduce the number of high oversight subrecipients; however, these additional criteria are not documented in the fiscal monitoring policy or risk score documentation. ICJIA passed through approximately $50,412,108 to subrecipients of the CVA program during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(e), a pass-through entity must evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. According to 2 CFR 200.332(e), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. 2 CFR 200.332(e)(3) requires pass-through entities to issue management decisions for applicable audit findings pertaining to the federal awards provided to the subrecipient and 2 CFR 200.332(e)(4) requires pass through entities to resolve audit findings through corrective action plans (CAP). In addition, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include establishing and performing monitoring procedures in accordance with Uniform Guidance and program requirements. Cause: In discussing these conditions with ICJIA officials, they stated ICJIA utilizes both a formal, documented policy to determine a risk score for over 600 active grantees and a more subjective, unwritten assessment to determine which higher and medium risk grantees actually will be scheduled to receive active fiscal monitoring procedures. The subjective analysis is used by ICJIA to adjust the potential volume of monitoring effort to the anticipated number of resources available in a given period. Due to the scarcity of resources, the agency prioritized reviews for subrecipients of other ICJIA programs. Possible Asserted Effect: Failure to fully document required risk assessments and to adequately monitor subrecipients may result in the subrecipient not properly administering the federal program in accordance with laws, regulations, and the grant agreement. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-035. (Finding Code 2024-044, 2023-035) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICJIA review their fiscal subrecipient monitoring procedures and implement additional procedures as necessary to ensure proper monitoring procedures are performed and documentation of monitoring activities are adequately maintained. Views of ICJIA Officials: ICJIA agrees with the findings as we have additional risk assessment criteria that are established but not documented.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-045: Inadequate Controls Over the Communication of Subrecipient Monitoring Results Condition Found: ICJIA did not consistently document supervisory reviews of the communication of on-site monitoring review results of its subrecipients for the Crime Victim Assistance (CVA) program in accordance with ICJIA’s control procedures. ICJIA internal control procedures require supervisory review and approval of program site visit reports prior to providing the results to subrecipients. During our testing of eight on-site reviews (for subrecipients with expenditures of $3,609,155), we noted the results of seven on-site reviews (for subrecipients with expenditures of $3,167,249) were communicated to the subrecipients prior to supervisory review and approval. ICJIA passed through approximately $50,412,108 to subrecipients of the Crime Victim Assistance (CVA) program during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include ensuring supervisory reviews of on-site monitoring results and communications are performed. Cause: In discussing these conditions with ICJIA officials, they stated the exceptions noted are due to inadequate policies and procedures. Possible Asserted Effect: Failure to properly review and approve monitoring reports may result in inaccurate monitoring information and results being communicated to subrecipients. Repeat Finding: A similar finding was reported in the prior year audit as number 2023-036. (Finding Code 2024-045, 2023-036, 2022-024) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICJIA review its current process for ensuring on-site monitoring results and communications are properly reviewed and approved before they are sent to subrecipients. Views of ICJIA Officials: ICJIA agrees with the finding and generally agrees with the identified cause. The issue stemmed from weaknesses in internal review and documentation processes, which limited the effectiveness of oversight during the reporting period. ICJIA has since implemented corrective actions to address these control gaps and prevent recurrence.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-046: Inadequate Controls over the Review of Subaward Information Required to be Reported for FFATA Condition Found: ICJIA did not perform supervisory reviews over subaward information required to be reported by the Federal Funding Accountability and Transparency Act (FFATA) for awards granted to subrecipients of the Crime Victim Assistance (CVA) program. The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing of 11 subawards (to subrecipients with expenditures totaling $30,433,708), we noted ICJIA could not provide evidence supervisory review procedures were performed to ensure the subaward information required to be reported by FFATA was complete and accurate. ICJIA passed through $50,412,108 to subrecipients of the CVA program during the year ended June 30, 2024. Criteria or Requirement: In accordance with 2 CFR 200.303, non-Federal entities are required to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include implementing procedures to review subaward information prior to submission to ensure all FFATA reports are accurately and timely prepared and submitted in accordance with federal regulations. Cause: In discussing these conditions with ICJIA officials, they stated ICJIA had not implemented formal supervisory review procedures. Possible Asserted Effect: Failure to perform supervisory reviews of subaward information required to be reported by FFATA could result in inaccurate reporting and noncompliance with federal requirements. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-037. (Finding Code 2024-046, 2023-037, 2022-022, 2021-028) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICJIA establish supervisory review procedures of subaward information required to be reported by FFATA. Views of ICJIA Officials: ICJIA agrees to the finding. During State fiscal year 2024, ICJIA was under FFATA policy from October 26, 2022.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-047: Failure to Accurately Prepare Financial Reports for the Crime Victim Assistance Program Condition Found: ICJIA did not prepare accurate federal financial status reports for the Crime Victim Assistance (CVA) program. ICJIA was required to prepare quarterly federal financial status reports (SF-425) for each open grant of the CVA program. During our testing over the quarterly SF-425 reports submitted during state fiscal year 2024, we noted the following error in the Victim of Crime Act (VOCA) 18 grant (#2018-V2-GX-0070) SF-425 report for the quarter ended September 30, 2023."See Table in the Audit Report" We further noted the supervisory review procedures performed for this report were not designed to operate at an appropriate level of precision to ensure financial reports are accurately prepared. Additionally, ICJIA does not perform analytical procedures to identify potential errors or unusual fluctuations in reported amounts. Criteria or Requirement: According to the USDOJ Grants Financial Guide 2024 section 3.15, the SF-425 must show the actual funds that have been spent (expenditures) and any bills that will be paid (unliquidated obligations incurred) at the recipient/subrecipient level for each award. Additionally, recipients are required to report on a quarterly basis the cumulative information on expenditures on line 10e, 10f, 10j, 10m, and 10n of the SF-425. According to the SF-425, Federal Financial Report box 13 for certification, non-Federal recipients of Federal grant awards must submit true, complete, and accurate information on the SF-425 reports. In addition, 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure information reported in required financial reports is accurate. Cause: In discussing these conditions with ICJIA officials, they stated grants impacted by the COVID-19 pandemic were subject to various alterations to the established match requirements and procedures, which led to some confusion amongst program staff responsible for preparing financial reports. Possible Asserted Effect: Failure to accurately prepare financial reports prevents USDOJ from effectively monitoring the CVA program. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-047) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICJIA review the process and procedures in place to prepare financial status reports required for the CVA program and implement the additional procedures necessary to ensure the reports are complete, accurate, and agree or reconcile to its financial records. Views of ICJIA Officials: ICJIA agrees to the finding and the cause cited.
State Agency: Illinois Criminal Justice Information Authority (ICJIA) Federal Agency: U.S. Department of Justice (USDOJ) Program Name: Crime Victim Assistance ALN and Program Expenditures: 16.575 ($53,095,634) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Cash Management Finding 2024-048: Inadequate Review of Cash Draw Calculations Condition Found: ICJIA did not adequately document their review of cash draw calculations for the Crime Victim Assistance program. During testing performed over 10 cash draws (totaling $18,381,243), we noted ICJIA could not provide evidence of supervisory review of the calculations supporting the cash draw request prior to submission for reimbursement. Upon further review, there were an additional 37 cash draws (totaling $29,408,246) where ICJIA could not provide evidence of supervisory review of the calculations supporting the cash draws. Criteria or Requirement: 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure supervisory reviews of cash draw calculations are properly documented. Cause: In discussing these conditions with ICJIA officials, they stated that a change to the formatting of the required Form C-64 in July 2023 removed the requirement for the agency to provide signature approval of each draw. ICJIA stopped documenting their review of cash draw calculations because of this update. Possible Asserted Effect: Failure to adequately perform and document supervisory reviews of cash draw calculations prior to request submission for reimbursement may result in the submission of inaccurate cash draw requests for reimbursement, which could result in the reimbursement of unallowable expenditures. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-048) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend ICJIA review their process to ensure supervisory reviews of cash draw calculations are properly documented. Views of ICJIA Officials: ICJIA agrees to the finding and the cause cited.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($68,210,944) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-049: Inadequate Review of Subrecipient Single Audit Reports Condition Found: IDOA did not adequately document review of single audit reports received from its subrecipients for the Aging Cluster program on a timely basis. The State of Illinois established the Grant Accountability and Transparency Unit (GATU) to implement the provisions of the State’s Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal and State programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submit their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning to the applicable state agency any findings attributable to amounts passed through to the subrecipient(s) by the State. IDOA staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards reconcile to IDOA records; (2) issuing management decisions on findings reported within required timeframes; and (3) applying sanctions to subrecipients who do not comply with reporting requirements (i.e. stop pay process). During our testing of a sample of single audit desk review files for seven subrecipients (with expenditures of $40,522,841 in the fiscal year), we noted the following: • For five subrecipients (with expenditures totaling $23,626,549), IDOA did not issue a management decision letter. • For one subrecipient (with expenditures totaling $2,117,589), IDOA did not issue a management decision letter over the subrecipient’s single audit that was received during state fiscal year 2024. In addition, the subrecipient did not file a single audit for the prior year with the Federal Audit Clearinghouse. While IDOA received a copy of the unfiled single audit report, a review was not performed and funding was not suspended in accordance with the State’s established policies. IDOA has not established controls over subrecipient single audit reviews at an adequate level of precision to ensure single audit reporting requirements, including obtaining and reviewing single audit reporting packages, issuing management decision letters, and invoking stop payment actions are performed within required timeframes. IDOA passed through $66,724,826 to subrecipients of the Aging Cluster program during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statues, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal award audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. In addition, 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with IDOA officials, they stated competing priorities and limited resources have impacted the Department’s ability to comply with this requirement. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations, and the grant agreement. Additionally, failure to issue management decision letters within six months of acceptance of the single audit report by the FAC results in noncompliance with federal regulations. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-049) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to ensure (1) subrecipient single audit report reviewed within established deadlines, (2) management decision letters are issued for all findings affecting its federal programs in accordance with the Uniform Guidance, and (3) follow up procedures are performed to ensure subrecipients have taken timely and appropriate corrective action. Views of IDOA Officials: The Department agrees with this finding. Although the Department shows that all the Area Agency on Aging single audits were received in the audit report review management system (ARRMS), there is one pending approval by the Audit Clearinghouse. The Department did not get the audits reconciled during state fiscal year 2024. The Department did not issue any management decision letters for those audits.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($68,210,944) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-050: Failure to Accurately Prepare Financial Reports for the Aging Cluster Condition Found: IDOA did not prepare accurate federal financial status reports for the Aging Cluster (Aging) program. IDOA is required to prepare semi-annual federal financial status reports (SF-425) for each open grant of the Aging program. During our testing of seven SF-425 reports submitted during state fiscal year 2024, we noted the following errors in the Older Americans Act Title III FFY21 grant (#2101ILOACM) SF-425 report for the semi-annual period ended September 30, 2023: "See Table in the Audit Report" We further noted the supervisory review procedures performed for this report were not designed to operate at an appropriate level of precision to ensure financial reports are accurately prepared. Additionally, IDOA does not perform analytical procedures to identify potential errors or unusual fluctuations in reported amounts. Criteria or Requirement: According to 2 CFR 200.328, Aging Cluster program grantees are required to submit SF-425 and Administration on Aging (AoA) Title III supplemental forms on a semi-annual basis. Reports are due within 30 days for the periods ending March 31 and September 30 and are based on the accrual basis. In addition, 2 CFR 200.303 requires non-Federal entities to, among other things, establish and maintain internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure information reported in required financial reports is accurate. Cause: In discussing these conditions with IDOA officials, they stated IDOA’s records were not updated for an error identified during the preparation and supervisory review of the report. Possible Asserted Effect: Failure to accurately prepare financial reports prevents the USDHHS from effectively monitoring the Aging program. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-050) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA review the process and procedures in place to prepare financial status reports required for the Aging program and implement the additional procedures necessary to ensure the reports are complete, accurate, and agree or reconcile to its financial records. Views of IDOA Officials: The Department agrees with this finding. The SF-425 reports are prepared by Department staff, reviewed by an outside contractor, entered into the payment management system, submitted and reviewed again before being certified. Although the adjustment has now been made and staff have been reminded to promptly enter and save adjustments or corrections in the working files at the time of the auditors’ review the spreadsheet was incorrect.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($68,210,944) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-051: Failure to Report Subaward Information Required by FFATA Condition Found: IDOA failed to report information required by the Federal Funding Accountability and Transparency Act (FFATA) for awards granted to subrecipients of the Aging Cluster program. The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee Name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that IDOA did not prepare or submit FFATA reports as required by federal regulations for any subawards made for the Aging Cluster program for the period July 1, 2023 through June 30, 2024. Additionally, we noted IDOA did not establish adequate internal controls over FFATA reporting to ensure all subawards were reported as required. 2024. Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro-purchase threshold and publish the required information on a public-facing, OMB-designated, governmentwide website and follow OMB guidance to support Transparency Act implementation. Consistent with the Federal Acquisition Register (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include complying with FFATA. Cause: In discussing these conditions with IDOA officials, they stated with the departure of experienced staff, delay in hiring the new staff and the system change where the FFATA information is to be entered this requirement was overlooked and missed getting completed. Possible Asserted Effect: Failure to identify and report subawards subject to FFATA results in noncompliance with federal regulations. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-051) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to identify awards subject to FFATA reporting requirements and report required subaward information in accordance with FFATA. Views of IDOA Officials: The Department agrees with this finding.
2024-002 – Lack of Segregation of Duties—Grant Report Approval and Submission Federal Agency: Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: 2024 Compliance Requirement: Reporting Type of Finding - Compliance Internal Control over Compliance – Significant Deficiency Condition: During our audit of the Town’s federal grant programs, we noted that the Town Accountant is solely responsible for both completing, approving, and submitting certain reports, required under the State and Local Fiscal Recovery Fund grant, to the United States Treasury. A secondary independent review or approval process is not in place prior to submission. Criteria: Uniform Guidance (2 CFR 200.303) requires non-federal entities to establish and maintain effective internal controls over federal award reporting that provide reasonable assurance that records are accurate, complete, and in compliance with federal statutes, regulations, and the terms and conditions of the award. Effective internal control includes appropriate segregation of duties. Cause: This situation results primarily from the Town’s limited administrative staffing, which restricts the ability to segregate the reporting and approval functions among different individuals. Effect: The lack of segregation of duties increases the risk that errors or noncompliance with federal award requirements in grant reporting could occur and not be prevented or detected in a timely manner. Recommendation: We recommend the Town implement a secondary review of grant reports, for any type of grant that requires external reporting to the grantor entity, prior to submission. This review could be performed by another member of management, or another designated official, and should be documented as evidence of oversight. If staffing limitations make this impractical, consider periodic and documented retrospective reviews of submitted reports. Views of Responsible Officials: The Town acknowledges the finding and recognizes the importance of maintaining adequate internal controls over federal grant reporting, including appropriate segregation of duties. We will be implementing additional procedures to ensure adequate preparation and review procedures to ensure accurate reporting to oversight agencies.
Information on the federal program: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds (SLFRF), Assistance Listing Number 21.027, U.S. Department of the Treasury Criteria: The 2 CFR § 200.303 requires that non-Federal entities establish and maintain effective internal control over the Federal award that provides reasonable assurance that the entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the SLFRF Compliance and Reporting Guidance requires recipients to maintain records and financial documents for a period of five years after all funds have been expended or returned to Treasury, which includes documentation of the reports submitted. Condition: During our testing of the quarterly Project and Expenditure (P&E) reports submitted to the U.S. Department of the Treasury, the County was unable to provide documentation or audit logs from the Treasury Portal demonstrating the internal review and approval process. Specifically, the County could not provide evidence of: • The identity of the individual who prepared the report. • The identity of the supervisor/official who reviewed and authorized the submission. • The specific date and time the reports were submitted. Due to significant staff turnover, the login credentials and historical "submission confirmation" records were not maintained or accessible for the audit period. Context/Cause: The County experienced turnover in key administrative positions responsible for ARPA grant management. The departing staff did not transition portal access or download the "Submission Summary" reports prior to their departure, and the County did not have a secondary process to archive these records outside of the portal. Effects: Without evidence of a formal review and approval process, there is an increased risk that inaccurate or unauthorized financial data could be reported to the Federal government. This lack of documentation constitutes a significant deficiency in internal controls over the reporting compliance requirement. Recommendation: The County should strengthen its internal controls over Federal reporting by archiving submissions, utilizing formal approval logs, and implementing succession planning. Auditee’s Response: We concur with the finding
The Arizona Department of Education’s Health and Nutrition Services Division (Division) did not perform all required monitoring procedures, resulting in an increased risk that $63.9 million of program monies the Division awarded to subrecipients during fiscal year 2024 may not be spent in accordance with the award terms, program requirements, and federal regulations Assistance Listings number(s) and name(s): 10.558 Child and Adult Care Food Program Award number(s) and year(s): 237237AZ300AZ3 October 1, 2022 through September 30, 2023 247AZ300AZ3 October 1, 2023 through September 30, 2024 Federal agency: U.S. Department of Agriculture Compliance requirement(s): Subrecipient Monitoring Questioned costs: None Condition The Division awarded $63.9 million to 322 subrecipients during fiscal year 2024, or 99.3% of the Division’s total program expenditures, but did not perform all the required monitoring of its subrecipients’ activities. While the Division did conduct on-site monitoring visits of subrecipients in accordance with its risk-assessment plan, it did not always obtain and review the responses to its written questionnaires from its subrecipients. For example, for 30 of the 40 subrecipients we tested, the Division did not review the submitted monitoring questionnaires to verify the accuracy of responses. Additionally, 10 of the 40 subrecipients we tested did not respond to the Division’s monitoring questionnaire at all, and the Division never followed up with these subrecipients. These questionnaires are designed to capture essential information from each subrecipient, including confirmation of total federal expenditures from all sources in addition to the program and whether the subrecipient is required to have a single audit performed. As a result, the Division did not determine whether required single audits were performed or, if applicable, whether the subrecipients took timely and appropriate action on all deficiencies noted. Effect The Division’s not verifying subrecipient single audits were conducted may result in the Division’s not following up on and ensuring corrective action is taken on audit findings that could potentially affect the program and/or issue management decisions for audit findings pertaining to the federal award. Further, there is an increased risk that $63.9 million of program monies the Division awarded to subrecipients may not be spent in accordance with the award terms, program requirements, and federal regulations. If monies are spent inconsistent with program requirements, those who intended to benefit from the program may not receive all the services or other benefits they otherwise would have received. Finally, the Arizona Department of Education is at risk that this finding applies to other federal programs it administers. Cause The Division’s written policies and procedures lacked requirements to obtain, review, verify, and analyze the subrecipient-monitoring questionnaires to confirm that those subrecipients required to obtain a single audit had a single audit completed, or to review those single audit reports for findings related to the program and issue management decisions when applicable. Criteria Federal regulation requires the Division to monitor subrecipients, which includes (2 CFR §200.332[e-f]): X Verifying single audits were conducted timely. X Following up on and ensuring corrective action is taken on audit findings that could potentially affect the program. X Issuing a management decision for audit findings pertaining to the federal award. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with applicable laws, regulations, and terms of the award (2 CFR §200.303). Recommendations to the Division 1. Perform all required monitoring of its subrecipients, including reviewing completed questionnaires submitted by its subrecipients to ensure they are complying with single audit requirements. If a single audit was completed for a subrecipient, ensure corrective action is taken on audit findings that could affect the program, and issue management decisions, as applicable. 2. Update and implement written policies and procedures that require the Division to obtain all subrecipient-monitoring questionnaires, document its review of each subrecipient’s submitted questionnaire, follow up on and ensure corrective action is taken on audit findings that could potentially affect the program, and issue management decisions pertaining to the federal award. 3. Train personnel responsible for reviewing monitoring questionnaires on the updated policies and procedures. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Arizona Office of Economic Opportunity did not ensure conference meals, graphic design services, and promotional item costs were appropriate, necessary, and managed to minimize charges and may be required to return $90,015 of WIOA Cluster funds Cluster name(s): WIOA Cluster Assistance Listings number(s) and name(s): 17.258 WIOA Adult Program 17.259 WIOA Youth Activities 17.278 WIOA Dislocated Worker Formula Grants Award number(s) and year(s): AA-34755-20-55-A-4 April 1, 2020 to June 30, 2023 AA-36307-21-55-A-4 April 1, 2021 to June 30, 2024 AA-38516-22-55-A-4 April 1, 2022 to June 30, 2025 23A55AW000049-01-00 July 1, 2023 to June 30, 2026 Federal agency: U.S. Department of Labor Compliance requirement(s): Not applicable Questioned costs: $90,015 Condition Contrary to federal regulations and the Department of Economic Security’s (DES) policy, the Arizona Office of Economic Opportunity (Office) paid for meals and promotional items provided to conference participants using WIOA Dislocated Worker Formula Grants federal program (WIOA federal program) funds without ensuring that the costs were appropriate, necessary, and managed to minimize charges to the federal award. Specifically, the Office hosted a 2-day Workforce Summit (Summit) conference in June 2024 and spent: X $61,038 on meals for 300 attendees over 2 days for lunch buffets, snacks, and beverages with an average attendee cost of $102 per person per day. X $25,302 for graphic design services without documenting how the services benefited the Summit. Office management reported the services were used to develop Summit communications and materials. X $3,675 on other promotional items, including pens, notebooks, lanyards, clips, vinyl pouches, and flyers, without maintaining evidence, such as photos, that the items displayed the required branding or funding tagline required by DES policies. The Office spent $5,066,045—including the questioned costs of $90,015—or nearly 5% of the State’s total $104,973,072 WIOA Cluster expenditures for the year ended June 30, 2024. We did not audit the WIOA Cluster for fiscal year 2024 because the Cluster did not meet the major federal program criteria. However, during fieldwork for the performance audit and sunset review of the Office, our contract auditors identified the above $90,015 unallowable costs charged to the WIOA federal program. Effect The Office’s paying for Summit costs without ensuring that they were appropriate, necessary, and managed to minimize charges to the federal award increased the risk that those who were intended to benefit from the program may not receive all the benefits they otherwise would have received. Consequently, the Office and/or DES may be required to return monies to the federal agency in accordance with federal requirements.1 Cause Office staff responsible for reviewing and approving Summit expenditures lacked sufficient guidance to identify unallowable costs because the Office lacked documented procedures, including a standardized review process, to ensure that costs charged to the WIOA federal program were allowable. DES passed WIOA federal program funds to the Office through an interagency service agreement (ISA) subaward but did not include conference-specific requirements imposed by federal regulations or additional requirements that DES imposed regarding promotional materials. Further, DES monitors the Office’s WIOA federal program expenditures during an annual desk review that takes place in May or June following the end of the prior fiscal year. DES management reported DES did not review any 2024 Summit costs since they will be subject to review during the May 2026 desk review. The review was scheduled almost 2 years after the unallowable costs were incurred because they were included in the Office’s July 2024 reimbursement request, which fell at the beginning of fiscal year 2025. Criteria Federal regulations and the Department’s Notice of Award for the WIOA federal program require the Office to sponsor conferences primarily to disseminate technical information. Further, the Office must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary, and managed to minimize charges to the federal award. Allowable costs may include facility rental, speakers’ fees, registration fees, meals and refreshments, and other incidental expenses, unless further restricted by the terms and conditions of the federal award (2 CFR §200.432). 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). In addition, DES’ policy requires that all promotional material must include a specific funding source tagline and the State brand.2 Further, federal regulations require DES to: X Evaluate the Office’s fraud risk and risk of noncompliance with its ISA subaward to determine the appropriate subrecipient monitoring procedures (2 CFR §200.332[c]). X Ensure its subaward with the Office includes all requirements imposed by federal statutes, regulations, and the terms and conditions of the federal award and any additional requirements that DES imposes on the Office to meet its responsibilities under the federal award (2 CFR §200.332[b][2] and [3]). Finally, federal regulations require establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Office 1. Ensure Summit costs charged to the WIOA federal program are appropriate, necessary, and managed to minimize charges to the federal award. 2. Develop and implement written procedures, including a standardized review process, to ensure that costs charged to the WIOA federal program are allowable prior to requesting reimbursement from DES. 3. Work with federal grantor and/or DES to resolve the $90,015 of questioned costs associated with the 2024 Summit and any subsequently held Summits. Recommendations to DES 4. Amend its ISA subaward with the Office to include conference-specific requirements imposed by federal regulations and additional requirements that DES imposed regarding promotional materials. 5. Adjust its monitoring procedures over the Office’s activities, which may include more frequent desk reviews of reimbursed costs, based on DES’ evaluation of the Office’s risk of noncompliance with federal regulations and DES’ notice of award for the WIOA federal program. 6. Provide Office staff responsible for reviewing and approving Summit expenditures with training and technical assistance on conference-related requirements. 2 Arizona Department of Economic Security. (2023). Workforce Innovation and Opportunity Act Policy Manual Title I-B, Chapter 3, Section 102.01 (C). Retrieved 4/8/2026 from https://des.az.gov/sites/default/files/media/Allowable-Costs-Fiscal-Policy-Section-100.pdf?time=1775665811357 Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Department of Economic Security could not support information reported to the federal agency and we were unable to determine whether the expenditures were appropriate Assistance Listings number(s) and name(s): 21.023 COVID-19 – Emergency Rental Assistance Program Award number(s) and year(s): ERA2-0165 May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement(s): Reporting Questioned costs: Not applicable Condition Contrary to federal regulations and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 2 award, the Department of Economic Security—Child and Community Services Division (Division) did not retain documentation to support information reported to the federal agency.1 Specifically, for the 2 quarterly reports we selected for test work, we found that the Division did not retain documentation, such as system reports, queries, or screenshots, to support the performance reporting information it reported in its 2 reports as required.2,3 Specifically, we found that the Division did not retain any support for the ERAP 2 quarter 4 compliance report (December 2023) and had only partial support for the ERAP 2 quarter 1 compliance report (March 2024) submitted to the grantor. Effect The Division’s failure to retain associated documentation for audit purposes resulted in us being unable to determine whether the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 10/17/2025 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf). 3 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report (U.S. Department of the Treasury. [2025]. Emergency Rental Assistance Program (ERA2) Treasury Portal User Guide, Version 4.0. Retrieved 10/17/2025 from https://home.treasury.gov/system/files/136/ERA2-Portal-Users-Guide.pdf). Cause The Division did not follow its policies and procedures to retain documentation to support the information it included in its 2 reports. Criteria For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as the administrative cost ratio, housing stability services ratio, and system for prioritizing assistance so that the federal agency can monitor performance and compliance. Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334). Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. This finding is similar to prior-year finding 2023-107 and was initially reported in fiscal year 2022. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Department of Economic Security failed to perform required subrecipient monitoring, increasing the risk that $9.3 million may have been spent inconsistent with program requirements Assistance Listings number(s) and name(s): 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number(s) and year(s): None Federal agency: U.S. Department of the Treasury Compliance requirement(s): Subrecipient monitoring Questioned costs: Unknown Condition The Department of Economic Security (DES) awarded $9.3 million to 13 subrecipients during fiscal year 2024, or 16.3% of DES’ $56.9 million of total federal expenditures for this federal program, but failed to include required information in its subawards to subrecipients and perform required monitoring. Specifically, DES: X Did not include information required by federal regulations in its subawards to subrecipients for 4 of 4 subrecipients tested. This included missing federal award identification information and any additional requirements DES imposed on the subrecipients to meet its responsibilities under the federal award. X Did not perform the required monitoring of the subrecipients’ activities or compliance with the award terms and program requirements for all 13 subrecipients. Effect DES’ failure to include required information in its subawards to subrecipients and perform required monitoring increased the risk that the $9.3 million of program monies DES awarded to subrecipients may not have been spent in accordance with the award terms and program or contract requirements. If monies were spent inconsistent with program and contract requirements, those intended to benefit from the program may not receive all the services or other benefits they otherwise would have received. Cause DES lacked entity-wide subrecipient-monitoring policies and procedures for its divisions to follow and instead relied on each division to design and implement its own subrecipient-monitoring procedures. However, the Child and Community Services Division (CCSD) personnel responsible for notifying and monitoring subrecipients reported they were either not aware of the subrecipient-monitoring requirements or did not follow its subrecipient-monitoring policies and procedures, as follows: X The CCSD personnel responsible for monitoring 6 subrecipients reported that they were not aware of the program’s subrecipient-monitoring requirements because of the program manager being on extended leave, turnover in staff knowledgeable of these requirements, and lack of established policies and procedures over monitoring the program’s subrecipients’ activities. Further, neither DES nor the CCSD personnel responsible for identifying subrecipients provided guidance to CCSD personnel responsible for subrecipient monitoring. X The CCSD personnel responsible for monitoring 7 subrecipients reported that they did not follow CCSD’s procedures for monitoring the program’s subrecipients’ activities because they were short staffed and prioritized monitoring other federal and State grants’ subrecipients’ activities. Criteria Federal regulation requires DES to ensure that every subaward is clearly identified to the subrecipient as a subaward by including in its award terms with subrecipients information necessary for the subrecipient to administer the program in accordance with federal requirements. Required information includes federal award identification, all requirements of the subaward, any additional requirements DES imposes on the subrecipient for DES to meet its responsibilities under the federal award, indirect cost rate, and audit and closeout requirements. Further, federal regulation requires DES to monitor subrecipients, which includes required monitoring procedures for (2 CFR §200.332): X Assessing the risk of each subrecipient’s noncompliance and performing monitoring activities based on those risk assessments, such as providing training or technical assistance on program-related matters and performing on-site reviews, selective audits, and/or other monitoring procedures. X Reviewing financial and performance reports. X Verifying single audits were conducted timely. X Following up on and ensuring corrective action is taken on audit findings that could potentially affect the program. X Issuing a management decision for audit findings pertaining to the federal award. Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to DES 1. Include information required by federal regulations in its subawards to subrecipients, including federal award identification information and any additional requirements DES imposed on the subrecipients to meet its responsibilities under the federal award. 2. Perform required monitoring of its subrecipients and their compliance with the award terms and program requirements. Develop, implement, and train all divisions on entity-wide written subrecipient-monitoring policies and procedures requiring all divisions to: 3. Ensure that every subaward is clearly identified to the subrecipient as a subaward by including in its award terms with subrecipients information necessary for the subrecipient to administer the program in accordance with federal requirements. Required information includes federal award identification, all requirements of the subaward, any additional requirements the DES imposes on the subrecipient for the DES to meet its responsibilities under the federal award, indirect cost rate, and audit and closeout requirements. 4. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures. 5. Review financial and performance reports. 6. Verify subrecipients receive timely single audits, if required; follow up on and ensure that corrective action is taken on any audit findings that could potentially affect the program; and issue management decisions for any audit findings pertaining to the federal award. 7. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any DES actions taken, if appropriate. 8. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate individuals within each division to perform necessary subrecipient-monitoring procedures. This finding is similar to prior-year finding 2023-106 and was initially reported in fiscal year 2023. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Department of Economic Security made unallowable benefits payments totaling $64,131, increasing the risk that the program applicants received utility and rental payments for which they were not entitled Assistance Listings number(s) and name(s): 21.023 COVID-19 – Emergency Rental Assistance Program Award number(s) and year(s): ERA2-0165 May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement(s): Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $37,901 Assistance Listings number(s) and name(s): 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award number(s) and year(s): None Federal agency: U.S. Department of the Treasury Compliance requirement(s): Activities allowed or unallowed, allowable costs/cost principles Questioned costs: $26,230 Total questioned costs: $64,131 Condition Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Child and Community Services Division (Division) made unallowable benefits payments totaling $64,131 during fiscal year 2024 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 1 The Arizona Department of Economic Security’s ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). Specifically, for 14 of 60 ERAP and 7 of 60 CSLFRF benefit payments tested, we found that the Division made unallowable benefits payments of $37,901 for ERAP and $26,230 for CSLFRF to or on behalf of ineligible program applicants or those who lacked required eligibility documentation and for other inappropriate costs, as follows: X The Division inappropriately paid $43,607 of benefit payments to or on behalf of 9 ineligible program applicants, including: y $36,622 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($29,647 for 6 ERAP program applicants and $6,975 for 1 CSLFRF applicant). y $6,300 paid to or on behalf of 1 CSLFRF applicant who previously received ERAP payments and was thus ineligible. y $685 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. X The Division inappropriately paid $14,815 of benefit payments to or on behalf of 10 program applicants, including: y $8,640 paid to or on behalf of 1 CSLFRF applicant for a lease buyout, which is an unallowed activity under Division policies. y $3,959 paid to or on behalf of 5 program applicants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable 1-time, lump sum payments ($3,121 for 3 ERAP applicants and $838 for 2 CSLFRF applicants). y $2,216 paid to or on behalf of 4 program applicants for rental assistance exceeding the amount documented on the lease ($2,210 for 3 ERAP applicants and $6 for 1 CSLFRF applicant). X The Division inappropriately paid $5,709 of benefit payments to or on behalf of 2 program applicants without obtaining required documentation to support they were eligible to receive them, including: y $5,709 paid to or on behalf of 2 program applicants without required proof of income, a lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills ($2,238 for 1 ERAP program applicant and $3,471 for 1 CSLFRF applicant). Effect The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not receive all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2024, the Division paid $44.2 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in Table 1 below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Cause Division management reported that personnel responsible for evaluating program applications and determining program applicants’ eligibility and allowability of related costs fell behind on reviewing applications and did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications and staffing shortages due to employee turnover. Further, Division management reported that it did not detect and correct inaccurate eligibility determinations because its policies and procedures did not require 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). adjudicators to perform a postreview of the benefits subsystem’s automated review of eligibility requirements, such as verifying the income thresholds and geographical location aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained, including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit benefit payments for lease buy-offs and prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Finally, the Division also must establish and maintain effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Update existing policies and procedures to include a postreview of the benefits subsystem’s automated review of eligibility requirements, such as verifying the income thresholds and geographic location aligned with the Division’s written policies and procedures and were supported by required documentation. The Division should correct any inaccurate eligibility determinations identified during the postreview. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2025 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past due amounts (a 1-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80% AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il. html#year2024. Further, applicants who live in Maricopa County must reside in Phoenix or Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts, and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]). 4. Work with the federal agencies to resolve the $64,131 of program monies that were spent in violation of federal regulations and its policies and procedures and that may need to be returned to the federal agencies. This finding is similar to prior-year finding 2023-105 and was initially reported in fiscal year 2023. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Four State agencies did not perform required subrecipient monitoring procedures, increasing the risk that program monies may have been misused and not spent in accordance with the award terms Assistance Listings number(s) and name(s): 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery (SLFRF) Funds Award number(s) and year(s): None Federal agency: U.S. Department of the Treasury Compliance requirement(s): Subrecipient monitoring Questioned costs: $1,623,846 Condition Contrary to federal regulation, the Arizona Department of Housing (ADOH), Arizona Department of Water Resources (ADWR), Arizona Office of Tourism (AOT), and Industrial Commission of Arizona (ICA) did not perform the required monitoring of their subrecipients’ activities or compliance with the award terms and program requirements. Specifically, we found that 4 of 10 State agencies we tested did not perform the various and required monitoring procedures identified in Table 1 below and Tables 2 through 4, page 129. In addition, as of the report date, April 23, 2026, the Governor’s Office of Strategic Planning and Budgeting (OSPB) took appropriate action by identifying and self-reporting to us $1,623,846 of expenditures for 8 SLFRF program subrecipients, who were awarded monies prior to fiscal year 2024, and may not have spent the monies in accordance with program requirements.1 Specifically, based on our fiscal year 2023 audit recommendations in finding 2023-102, OSPB performed missing risk assessments for subrecipients awarded monies during fiscal years 2022 and 2023. As a result of these assessments, OSPB conducted additional onsite monitoring or desk reviews based on those results and identified $1,623,846 in questionable costs by its subrecipients. Additionally, OSPB identified several of these questioned costs as potentially fraudulent or inappropriate and forwarded this information to the Attorney General’s Office for further review. We selected OSPB as part of the 10 State agencies tested during fiscal year 2024. Of 24 OSPB subrecipients we tested, we did not identify any deficiencies with OSPB performing the required monitoring of their subrecipients’ activities or compliance with the award terms and program requirement during fiscal year 2024. In total during fiscal year 2024, there were 14 State agencies that paid $270.2 million to subrecipients, as shown in Table 5 below, or 56.2% of the State’s $480.4 million total federal expenditures for this program. Effect The 4 State agencies’ lack of required monitoring increased the risk that the $41.4 million of program monies they paid to 131 subrecipients may have been misused and not spent in accordance with the award terms and program requirements as shown in Table 5, page 130. If monies are spent inconsistent with program requirements, those who were intended to benefit from the program may not receive all the services or other benefits they otherwise would have received. ADOH, ADWR, AOT, and ICA are at risk that this finding applies to other federal programs they administer. Further, OSPB’s previously identified expenses that may not have been spent in accordance with program requirements may result in OSPB being required to return up to $1,623,846 of program monies to the federal agency in accordance with Uniform Guidance requirements.2 Cause Despite subrecipient monitoring requirements being included in the federal regulations, 4 State agencies did not develop and/or implement sufficient subrecipient monitoring policies and procedures to comply with federal regulations. Specifically, X ADOH’s management reported that its policies and procedures did not contain clear criteria for when single audits should be obtained and the process for conducting risk assessments. X ADWR’s management reported that it lacked policies and procedures for obtaining single audits and conducting risk assessments. X AOT’s management reported that it performed only limited monitoring procedures for subrecipients who expended more than $750,000 of AOT awards during the year. Additionally, AOT’s management reported that it misunderstood the detailed transactions required to substantiate the $50,214 in payroll expenditures. X ICA’s management reported that there was a misunderstanding on which State agency was responsible for performing the subrecipient monitoring of the monies it passed through to subrecipients and consequently did not develop all the necessary subrecipient monitoring policies and procedures. Further, OSPB previously reported that it hired additional staff in fiscal year 2023 to begin addressing audit finding issues noted in prior years and began performing required risk assessments in fiscal year 2024. 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, OSPB, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take action, as directed by the federal awarding agencies (2 CFR §200.521). Criteria Federal regulation requires State agencies to monitor subrecipients, which includes required monitoring procedures, as follows (2 CFR §200.332): X Assess the risk of each subrecipient’s noncompliance and perform monitoring activities based on those risk assessments. Based on risk, additional monitoring procedures could include providing training or technical assistance on program-related matters, performing site visits, and/or other monitoring procedures. X Review financial and performance reports. X Verify single audits were conducted timely; following up on and ensuring corrective action is taken on audit findings that could potentially affect the program; and issuing a management decision for audit findings pertaining to the federal award. X Include required information in subrecipient subaward agreements, including required federal award information; requirements imposed by federal statutes, regulations, and the terms and conditions of the federal award; any additional requirements that the pass-through entity imposes, and a requirement that the subrecipient permit the pass-through entity to access the subrecipient’s records and financial statements to fulfill its monitoring requirements. In addition, the State’s subrecipient monitoring policies and procedures require State agencies to consider and assess risk of each subrecipient and carry out required and various other monitoring procedures based on those risk assessments.3 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to ADOH, ADWR, AOT, and ICA Work with the State’s Office of Strategic Planning and Budgeting to either update or develop and implement policies and procedures and train responsible staff to perform required monitoring of their subrecipients to ensure compliance with award terms and program requirements, including procedures to: 1. Assess the risk of each subrecipient’s noncompliance and perform additional monitoring procedures based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, performing site visits, and/or other monitoring procedures. (ADOH, ADWR, and ICA) 2. Verify subrecipients receive timely single audits, follow up on and ensure that corrective action is taken on audit findings that could potentially affect the program, and issue management decisions for audit findings pertaining to the federal award. (ADOH, ADWR, AOT, and ICA) 3 Arizona Department of Administration Office of Grants and Federal Resources. (2018). Grants Management Manual – Grantor, Chapter 8: Award Monitoring. Retrieved 10/29/2025 from https://ospb.az.gov/sites/default/files/2026-01/Arizona%20Grants%20Management%20 Grantor%20Manual%20Edition%202022.pdf 3. Request and view supporting transaction details prior to paying subrecipients for payroll costs to verify they meet the requirements of the award terms and program requirements. (AOT) 4. Establish subaward agreements with subrecipients communicating allowable uses of program monies and other information required by federal regulations prior to distributing program monies. (ICA) Recommendations to OSPB 5. Work with the federal agency and the subrecipients to resolve the $1,623,846 of program monies that may have been spent in violation of its federal award terms and that may need to be returned to the federal agency. 6. Continue to assess the risk of each subrecipient’s noncompliance and perform additional monitoring procedures based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, performing site visits, and/or other monitoring procedures to ensure questioned costs are timely identified and remedied. This finding is similar to prior-year finding 2023-102 and was initially reported in fiscal year 2022. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Governor’s Office of Strategic Planning and Budgeting inaccurately reported $33.1 million expenditures to the federal agency and may be required to return excess monies reported Assistance Listings number(s) and name(s): 21.027 COVID-19—Coronavirus State and Local Fiscal Recovery Funds Award number(s) and year(s): None Federal agency: U.S. Department of the Treasury Compliance requirement(s): Reporting Questioned costs: Not applicable Condition The Governor’s Office of Strategic Planning and Budgeting (OSPB) administration inaccurately reported $33.1 million of program expenditures as of June 30, 2024, to the federal agency in its quarterly reports when compared to the State’s records. Upon our analysis of all projects within the 4 quarterly reports, we found a total cumulative overstatement of program expenditures of $33.1 million reported as of June 30, 2024. Additionally, we tested 2 of 4 quarterly reports and found that OSPB inaccurately reported 23 of 126 projects totaling $16.5 million in expenditures during fiscal year 2024. The $16.5 million represents over 9% of the $181.4 million of program expenditures we tested for fiscal year 2024. Effect OSPB’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to monitor OSPB’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, there is a risk that OSPB may be required to return excess monies reported as spent to the federal agency if the expenditures have not been fully reconciled at the end of the program, which occurs during fiscal year 2027. 1 Cause OSPB staff responsible for preparing the reports did not compile the reports from the State’s accounting records, which are the official record of expenditures made for the program, and instead compiled them from OSPB’s internal grants management system that had not been reconciled to the State’s accounting records for accuracy. OSPB’s management reported that 1 The Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions as of April 29, 2025, indicate that recipients may expend funds to cover administrative closeout costs until the final Project and Expenditure Report is due on April 30, 2027. Further, funds not expended by the applicable deadline must be returned to the U.S. Treasury. Retrieved 2/20/2026 from https://home.treasury.gov/system/ files/136/SLFRF-Final-Rule-FAQ.pdf they developed and began implementing a procedure to reconcile the quarterly reports to the State’s accounting records near the end of fiscal year 2024. However, this procedure was not fully implemented and would not be reflected in quarterly reports until fiscal year 2025. Criteria Federal law, regulation, and guidance requires OSPB to quarterly accurately report its cumulative obligations and expenditures by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.2 Accordingly, OSPB’s policies and procedures, including federal reporting templates, provide instructions for employees to follow to meet these reporting requirements. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303). Recommendations to OSPB 1. Report accurate and complete program information to the federal agency. 2. Implement procedures requiring employees to reconcile expenditure amounts to the State’s accounting records and investigate and resolve any differences prior to submitting the report to the federal agency. 3. Perform a reconciliation for reports OSPB has already submitted to the federal agency to identify those that contain errors, and revise and resubmit those reports if practicable or notify the federal agency of these reporting errors. This finding is similar to prior-year finding 2023-103 and was initially reported in fiscal year 2022. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 2 The American Rescue Plan Act established the State and Local Fiscal Recovery Fund (SLFRF) and was enacted March 11, 2021. Federal interim guidance for implementing SLFRF was established by the U.S. Treasury in May 2021 and finalized in January 2022 in effect until April 1, 2022. All the U.S. Treasury’s SLFRF guidance was finalized in the Federal Register (FR) on January 27, 2022 (FR Vol. 87, No. 18, Doc. 2022-00292) and became effective on April 1, 2022. Retrieved 10/14/2025 from https://home.treasury.gov/system/files/136/FRF-Interim-Final- Rule.pdf
The Arizona Department of Education did not monitor procedures of charter schools with relationships with charter management organizations, risking funds not being spent in accordance with the award terms and program requirements, and reduced future awards Assistance Listings number(s) and name(s): 84.010 Title I Grants to Local Educational Agencies 84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants)* *referred to as Title II Award number(s) and year(s): S010A200003 July 1, 2020 through September 30, 2023 S010A210003 July 1, 2021 through September 30, 2023 S010A220003 July 1, 2022 through September 30, 2023 S010A230003 July 1, 2023 through September 30, 2024 S367A210049 July 1, 2021 through September 30, 2023 S367A220049 July 1, 2022 through September 30, 2023 S367A230049 July 1, 2023 through September 30, 2024 Federal agency: U.S. Department of Education Compliance requirement(s): Special tests and provisions Questioned costs: Unknown Condition The Arizona Department of Education’s Grants Management Department (Department) disbursed over $59 million and over $6.8 million in Title I and Title II funds, respectively, to 242 Title I and 233 Title II charter school local educational agencies (LEAs) during fiscal year 2024 but did not perform certain monitoring procedures required by the U.S. Department of Education. Specifically, the Department did not identify which of the 242 Title I and 233 Title II charter school LEAs receiving federal grant monies had relationships with charter management organizations (CMOs) in order to perform additional required monitoring to assess the additional risk posed by conflicts of interest, related-party transactions, or insufficient segregation of duties at these charter schools.1 1 The term “charter management organization” means a nonprofit organization that operates or manages a network of charter schools linked by centralized support, operations, and oversight (20 USC 7221i[3]). Retrieved 11/11/2025 from https://www.law.cornell.edu/uscode/ text/20/7221i#2 Effect The Department’s not identifying or performing additional monitoring of charter schools with relationships with CMOs increases the risk that funds allocated to these charter school LEAs may not have been spent in accordance with the award terms and program requirements and could result in the U.S. Department of Education reducing future awards.2 Further, if monies were spent inconsistently with program requirements, those who were intended to benefit from the program may not have received all the services or other benefits they otherwise would have received. Additionally, the Department is at risk that this finding applies to other federal programs it administers. Cause The Department’s documented program policies and procedures for monitoring LEAs did not differentiate between regular LEAs, charter schools without CMOs, or charter schools with relationships with CMOs and did not include specific procedures to assess the additional risk posed by conflicts of interest, related-party transactions, or insufficient segregation of duties. The Department reported that it began incorporating policy changes into grant administration and monitoring policies in early 2024; however, these policies were not completed until May 2024 and did not become effective until fiscal year 2025. Criteria Federal regulations require the Department to monitor subrecipients, including charter schools, which includes required monitoring procedures for assessing the risk of each subrecipient’s noncompliance and monitoring activities based on those risk assessments. Those federal regulations also provide that monitoring procedures may include reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures (2 CFR §200.332[b and d]) As part of these monitoring responsibilities, the U.S. Department of Education requires the Department to monitor charter schools with relationships with CMOs and assess the additional risk posed by conflicts of interest, related-party transactions, or insufficient segregation of duties.3,4 Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 On September 28, 2015, the U.S. Department of Education issued a letter to State Educational Agencies (SEAs) reminding them of their role in helping to ensure that federal funds accessed by public charter schools are used for intended, appropriate purposes, and provided additional resources for states, and specifically SEAs, to consult as they consider improvements to their monitoring and oversight procedures for charter schools (U.S. Department of Education. [2015, September]. Letter to SEAs. Retrieved 11/18/2025 from https://oese.ed.gov/files/2020/07/ finalsignedcsp.pdf 4 On September 29, 2016, the U.S. Department of Education’s Office of Inspector General issued an audit report on charter schools with CMOs and identified risks such as conflicts of interest, related-party transactions, or insufficient segregation of duties (U.S. Department of Education. [2016, September]. Nationwide Assessment of Charter and Education Management Organizations. Retrieved 11/18/2025 from https://oig.ed. gov/sites/default/files/reports/2023-11/a02m0012.pdf Recommendations to the Department 1. Perform annual monitoring over charter schools with relationships with CMOs, including performing risk-assessment procedures over the additional risk posed by conflicts of interest, related-party transactions, or insufficient segregation of duties, and carry out monitoring activities based on those risk assessments such as reviewing financial and performance reports, providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures. 2. Implement revisions to existing LEA-monitoring policies and procedures and train employees to identify charter schools that have relationships with CMOs and to then assess and design monitoring procedures over conflicts of interest, related-party transactions, or insufficient segregation of duties. This finding is similar to prior-year finding 2023-125 and was initially reported in fiscal year 2023. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Arizona Department of Education failed to report complete, accurate information on the federal reporting system, risking transparent reporting on its federal programs’ subawards Assistance Listings number(s) and name(s): 84.010 Title I Grants to Local Educational Agencies Award number(s) and year(s): S010A200003 July 1, 2020 through September 30, 2023 S010A210003 July 1, 2021 through September 30, 2023 S010A220003 July 1, 2022 through September 30, 2023 S010A230003 July 1, 2023 through September 30, 2024 Assistance Listings number(s) and name(s): 84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) Award number(s) and year(s): S367A210049 July 1, 2021 through September 30, 2023 S367A220049 July 1, 2022 through September 30, 2023 S367A230049 July 1, 2023 through September 30, 2024 Assistance Listings number(s) and name(s): 84.425D COVID-19 – Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) Fund 84.425U COVID-19 - Education Stabilization Fund - American Rescue Plan - Elementary and Secondary School Emergency Relief (ARP ESSER) Award number(s) and year(s): S425D210038 January 5, 2021 through September 30, 2023 S425U210038-21C March 24, 2021 through September 30, 2026 Federal agency: U.S. Department of Education Compliance requirement(s): Reporting Questioned costs: Not applicable Condition Contrary to federal laws and regulations and the State of Arizona Accounting Manual, the Arizona Department of Education (ADE) failed to report complete and accurate information on the federal government’s reporting system for nearly $5.3 million, $887,450, and over $11.8 million in subawards it made to local education agencies (LEAs) under the Assistance Listings numbers 84.0101 (Title I), 84.367 (Title II), and 84.425D/U (ESSER) programs, respectively, during fiscal year 2024. As shown in the bullets and Table 1 below, we tested a total sample of 8 subawards for the Title I program at ADE and found that, for 8 subawards, ADE failed to report the following: X Any required information about the subawards, including the subaward organization names and subaward amounts and terms for 3 subawards tested, totaling $289,225. X Required information within the time frame for 5 subawards tested, totaling nearly $5 million, resulting in the reports being submitted between 20 and 21 months late. As shown in the bullets and Table 2 below, we tested a total sample of 9 subawards for Title II program at ADE and found that, for 9 subawards, ADE failed to report the following: X Any required information about the subawards, including the subaward organization names and subaward amounts and terms for 3 subawards tested, totaling $118,651. X Required information within the time frame for 6 subawards tested, totaling $768,799, resulting in the reports being submitted 21 months late. As shown in the bullets below and page 165 and Table 3, page 163, we tested a total sample of 16 subawards for ESSER program at ADE and found that, for 16 subawards, ADE failed to report the following: X Any required information about the subawards, including the subaward organization names and subaward amounts and terms for 3 subawards tested, totaling $8.0 million. X Required information within the time frame for 13 subawards tested, totaling $3.8 million, resulting in the report being submitted between 20 and 37 months late. X Accurate key elements for 2 subawards tested, totaling $303,740, that included incorrect subawards obligation dates. Effect The State’s stakeholders and the public did not have access to transparent and timely information about ADE’s federal subaward spending decisions on USAspending.gov as required by federal laws and regulations. Additionally, ADE is at risk that this finding applies to other federal programs it administers. ADE is at risk of not transparently reporting expenditures to subrecipients for these federal programs during fiscal year 2024, as shown in Table 4, page 164. Cause Although the programs’ reporting requirements were provided as additional award terms and conditions on the federal agency’s website, and the State of Arizona Accounting Manual instructed State departments to follow them, ADE did not require independent reviews of the reports for accuracy and completeness prior to uploading subaward data to the federal government’s reporting system. In addition, ADE did not require a post review to verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. Therefore, ADE was unaware of the errors. Criteria The Federal Funding Accountability and Transparency Act (FFATA) and federal Uniform Guidance regulations require ADE as a direct recipient of federal awards, to report certain information about each subaward action equaling or exceeding $30,000 in federal monies on the federal government’s reporting system no later than month-end of the month following the subaward action so that the information can be displayed to the public on USAspending.gov.1 Specifically, the federal Uniform Guidance requires ADE to report the subrecipient organization’s name, award amount, award term, and other information about the subaward, if applicable, for each subaward action equaling or exceeding the $30,000 threshold (2 CFR §170.320 and Appendix A to Part 170). Additionally, the State of Arizona Accounting Manual requires ADE to perform this reporting 1 The FFATA of 2006 (Public Law 109-282), as amended by section 6202 of Public Law 110-252, was enacted to provide the public with transparency on federal award spending to hold the recipient government accountable for each spending decision and to help reduce wasteful spending of federal monies. As such, federal Uniform Guidance requires reporting at sam.gov for federal awards.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to ADE 1. Immediately report on the federal government’s reporting system the required information for its subawards for these 3 programs, including reviewing, correcting, and/or resubmitting any inaccurately reported information. 2. Follow the State of Arizona Accounting Manual for reporting subaward actions equaling or exceeding $30,000 no later than month-end of the month following the subaward action, as required by the FFATA and federal Uniform Guidance, which may include providing training to ADE staff responsible for reporting ADE’s subaward actions to the federal government’s reporting system. Implement procedures requiring independent reviews to: 3. Ensure the subaward data is complete and accurate prior to uploading it to the federal government’s reporting system. 4. Verify that the subaward data it uploaded to the federal government’s reporting system was complete and correctly displayed. This finding is similar to prior-year finding 2023-126 and was initially reported in fiscal year 2021. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 2 State of Arizona’s Department of Administration, General Accounting Office. (2022). State of Arizona Accounting Manual: 7045, FFATA and the DATA Act. Retrieved 12/11/2025 from https://gao.az.gov/sites/default/files/2022-08/7045%20FFATA%20and%20the%20DATA%20Act%20 220523.pdf
The Arizona Department of Education failed to follow State law for $30.2 million of goods and services purchases and risks not receiving the most advantageous prices Assistance Listings number(s) and name(s): 84.425U COVID-19-Education Stabilization Fund-American Rescue Plan - Elementary and Secondary School Emergency Relief (ARP ESSER) Award number(s) and year(s): S425U210038-21C March 24, 2021 through September 30, 2026 Federal agency: U.S. Department of Education Compliance requirement(s): Procurement Questioned costs: $13,604,457 Condition The Arizona Department of Education (ADE) and Arizona Department of Administration took appropriate action by reporting to us and the Arizona Attorney General an instance of potential fraud. As part of our review, we determined that contrary to federal regulation, State law, and the Arizona Procurement Code, ADE’s Procurement Division (Division) failed to follow State law and related administrative rules when procuring $30.2 million of goods or services from third-party vendors, of which $13.6 million was spent during fiscal year 2024. Specifically, the Division did not obtain proper approvals and/or prepare written determinations for exceptions to using competitive procurement methods for 7 of 8 vendors we tested as follows: X For 6 vendors, the Division did not obtain approval from the State Procurement Officer to use noncompetitive procurements or prepare written determinations for exceptions to competition when awarding contracts for $27.2 million of goods or services, such as student diagnostic assessments, of which $13.5 million was spent during fiscal year 2024. Specifically, the Division used a Request for Grant Application noncompetitive method, which is used when ADE is seeking to provide financial or other assistance to another entity. X For 1 vendor, the Division issued a noncompetitive waiver to award a contract totaling $3 million without obtaining written approval from the State Procurement Officer. ADE spent nearly $121,000 during fiscal year 2024 with this vendor. Effect The Division’s failure to follow State law and related administrative rules for procuring goods and services increased ADE’s risk of not receiving the most advantageous price for the $37.3 million paid to 57 vendors for goods and services purchased with federal monies during fiscal year 2024, thereby increasing the risk of wasting federal monies. If ADE could have obtained these goods or services at a lower cost, these savings could have been used in other areas to benefit the State and its residents, such as diagnostic and learning loss assessments. Finally, ADE is at risk that this finding applies to other federal programs it administers. Cause The Division reported that it had limited time to obligate monies within the program period. However, we found that ADE had at least 4 months to conduct a competitive solicitation for the goods and services. ADE also reported that because of procurement staff turnover, ADE is unable to justify the procurement decisions reflected in the items we tested. ADE’s policies lacked procedures to obtain approval from the State Procurement Officer and to prepare written determinations for exceptions to using competitive procurement methods, such as noncompetitive waivers, when purchasing goods and services from third-party vendors, as required by the Arizona Procurement Code. Criteria Federal regulation requires ADE to follow the same policies and procedures it uses for nonfederal procurements (2 CFR § 200.317). State law and the Arizona Procurement Code require ADE to conduct all procurements in accordance with established thresholds, methods, and documentation standards, including approval from the State Procurement Officer for noncompetitive procurements, and further require written determinations for exceptions to competition, such as noncompetitive waivers, and that such determinations include sufficient justification, approvals, and supporting documentation.1,2 Further, federal regulation also requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Follow federal regulation, State law, and the Arizona Procurement Code for procurements related to federal grant awards. 1 A.R.S. Title 41, Ch. 23, and the Arizona Administrative Code Title 2, Ch. 7, R2-7-101. 2 State of Arizona, Department of Administration Procurement. (2022). Arizona Procurement Code. Retrieved 3/5/2026 from https://spo.az.gov/ sites/default/files/2025-05/Arizona%20Procurement%20Code_11-22_0.pdf 2. Update and implement policies and procedures and responsible employees to use competitive procurement methods or otherwise obtain approval from the State Procurement Officer and to prepare written determinations for exceptions to using competitive procurement methods, such as noncompetitive waivers, when purchasing goods and services from third-party vendors. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Department of Emergency and Military Affairs’ Emergency Management Division did not always retain documentation supporting payroll, increasing the risk that $103,045 may not have been spent in accordance with award terms and conditions Assistance Listings number(s) and name(s): 97.042 Emergency Management Performance Grants Award number(s) and year(s): EMF-2021-EP-0016-S01 October 1, 2020 through September 30, 2023 EMF-2021-EP-0018-S01 October 1, 2020 through June 30, 2025 EMF-2022-EP-0009-S01 October 1, 2021 through September 30, 2025 EMF-2023-EP-0008-S01 October 1, 2022 through September 30, 2025 Federal agency: U.S. Department of Homeland Security Compliance requirement(s): Activities Allowed or Unallowed/Allowable Costs/Cost Principles Questioned costs: $103,045 Condition Contrary to federal regulations and its policy, the Department of Emergency and Military Affairs’ Emergency Management Division (Division) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Division did not retain personnel action forms supporting and approving employees’ pay rates and/or authorization to work on the program for 5 of 40 employees we tested totaling $103,045, as follows: X $95,080 for 2 employees’ annual payroll costs lacked supported pay rates and authorization to work on the program. These employees transferred to other State agencies after the fiscal year ended, and contrary to Division policy and federal regulation, the Division did not retain their personnel records. X $7,965 for 3 employees annual payroll costs lacked supported pay rates. Previous personnel action forms authorized these 3 employees to work on the program. Effect The Division’s failure to retain documentation supporting payroll costs increased the risk that $103,045 may not have been spent in accordance with award terms and conditions. Consequently, the Division may be required to return monies to the federal agency in accordance with federal requirements.1 The Division’s $1.7 million overall program payroll costs paid to 76 employees, or 23% of $7.3 million total program costs during fiscal year 2024, are at an increased risk of not being spent in accordance with the award terms and conditions. Finally, the Division is at risk that this finding applies to other federal programs it administers. Cause The Division’s Administrative Services Office (Office) was not trained on or aware of Division policy requirements to prepare personnel action forms authorizing all employee pay rate changes and program assignments and to retain the records of employees who subsequently transferred to another State agency. Criteria Federal regulation requires the Division to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430 [g][1][i]) and retain these records for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or passthrough grantor (2 CFR §200.334). In addition, the Department of Emergency and Military Affairs’ policy requires the Division to prepare and retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments. It also requires the Division to retain necessary personnel records of employees who transfer to another State agency for no less than 5 years.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 State of Arizona, Department of Emergency and Military Affairs. (2007). DEMA Directive 20.1: State Human Resources Administration, Sections 1.3: The Official Personnel File, 1.5: Employees Transferring to Another State Agency. Recommendations to the Division 1. Retain documentation for all payroll costs, including personnel action forms, to demonstrate employees’ salaries and wages are authorized to be charged to the federal program and spent in accordance with the program’s award terms and conditions. 2. Review the fiscal year 2024 payroll costs for the program to ensure they were properly supported and spent in accordance with the award terms and conditions and coordinate with the U.S. Department of Homeland Security, as necessary, to adjust future federal reimbursement requests or repay any unallowable costs the Division charged to the program. 3. Implement its written policy and train employees to prepare and retain for no less than 5 years the personnel action forms authorizing all employee pay rate changes and program assignments, including those who transfer to another state agency. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The Department of Emergency and Military Affairs’ Emergency Management Division (Division) did not retain adequate documentation supporting reimbursement requests, matching requirements, and financial reports, risking the Division receiving monies it was not entitled to Assistance Listings number(s) and name(s): 97.042 Emergency Management Performance Grants Award number(s) and year(s): EMF-2021-EP-0016-S01 October 1, 2020 through September 30, 2023 EMF-2021-EP-0018-S01 October 1, 2020 through June 30, 2025 EMF-2022-EP-0009-S01 October 1, 2021 through September 30, 2025 EMF-2023-EP-0008-S01 October 1, 2022 through September 30, 2025 Federal agency: U.S. Department of Homeland Security Compliance requirement(s): Cash management, matching, and reporting Questioned costs: Unknown Condition Contrary to federal regulations, the Division did not retain adequate documentation supporting reimbursement requests, matching requirements, and financial reports as follows: X Cash management For 4 of 5 requests for reimbursement we tested, the Division did not retain adequate documentation to support the amounts requested for reimbursement from the federal agency. The Division used documentation provided by its subrecipients to calculate the amount to both reimburse the subrecipient and request from the federal government. However, while the Division provided documentation of the invoices paid under their requests for reimbursement, they were unable to indicate which invoice applied to the respective request for reimbursement. X Matching The Division was unable to demonstrate through its reimbursement requests or other supporting documentation how it used nonfederal funds for at least 50% of the total project cost. X Reporting The Division did not retain documentation supporting 3 of 3 Federal Financial Reports (FFR) we tested, as follows: y For the 2023 quarter 4 FFR, the Division could only provide an unapproved draft copy and could not demonstrate that it submitted the FFR to the federal agency. y For the 2024 quarter 1 FFR and the annual FFR, the Division did not retain underlying general ledger data or other records to support costs reported, including indirect costs calculated from an approved indirect cost rate agreement. Effect The Division’s failure to retain adequate documentation supporting reimbursement requests, matching requirements, and financial reports resulted in our being unable to determine whether the reimbursements were appropriate, matching requirements were met, and the reports were complete and accurate. There is also an increased risk that Division could receive federal monies to which it is not entitled. Also, if matching requirements are not met, the Division may be required to return program monies to the federal agency in accordance with federal requirements.1 Further, the federal agency is unable to rely on the financial reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and evaluate the program’s success. Finally, the Division is at risk that this finding applies to other federal programs it administers. Cause The Division reported that turnover of staff who previously prepared documentation to support reimbursement requests, matching requirements, and financial reports and submitted the reimbursement requests and financial reports resulted in the Division’s inability to locate the supporting documentation for the reports, including the applicable indirect cost agreement, or explain how to reconcile a large number of invoices that were provided to the reimbursement requests tested. The Division also did not have formal policies and procedures requiring an independent review to ensure the accuracy and completeness of the information included in the reports, and the retention of all documentation supporting data included in its reports. Consequently, only 2 of the 3 reports we tested were reviewed and approved prior to submitting the reports to the federal agency. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513(c)). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). Criteria Federal regulation requires the Division to retain all public records, including financial records and supporting documentation, related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). In addition, federal regulation requires the Division to submit its quarterly reports no later than 30 days after the reporting period (2 CFR §200.328). Federal regulation also requires the Division to use the reimbursement method to administer the program, whereby the Division is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[B][3]). Also, the program’s grant agreement requires the Division to match 50% of the approved project costs from nonfederal sources. Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Retain documentation for all reimbursement requests, matching requirements, and financial reports, such as the underlying general ledger data, approved indirect cost rate agreements, or information provided by its subrecipients for a period of 3 years from the date the program’s final report is submitted to the federal agency. 2. Review the reports identified above to ensure they were accurate. If any inaccuracies are identified, work with the federal grantor to correct these reports. 3. Develop and implement written policies and procedures over the preparation of reimbursement requests and financial reports, and the monitoring of the Division’s matching requirements as well as the retention of these records. The Division should train responsible staff on these policies and to perform an independent review of these documents to ensure accuracy and completeness prior to submission to the federal agency. 4. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements over reimbursement requests, matching requirements, and financial reports. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The University of Arizona did not support salary and employee-related expenses costs of over $4.8 million that it may be required to repay to the federal agency Cluster name(s): Research and Development Cluster Assistance Listings number(s) and name(s): Various Award number(s) and year(s): Various, 2024 Federal agency: Various Compliance requirement(s): Allowable costs/cost principles Questioned costs: $4,849,561 Condition Contrary to federal regulation and the University of Arizona’s (University) policies and procedures, the University did not properly support the distribution of salary and employee-related expenses (ERE) costs of $4,849,561 to ensure they were accurate, allowable, and properly allocated to the Research and Development Cluster during fiscal year 2024. Specifically, principal investigators or supervisors who had knowledge of work performed on the federally funded Research and Development Cluster projects either did not review and approve effort certification reports or approved them late. We tested 17 employees’ salary and ERE costs charged to the Research and Development Cluster and found that principal investigators or supervisors:1 X Did not approve 3 effort-certification reports for 2 employees. X Did not approve 5 effort-certification reports for 5 employees within the required 30 working-day time frame. Reports were approved between 4 and 35 days late. Further, we obtained a report from the University’s financial system of outstanding effortcertification reports for fiscal year 2024 and found 240 reports supporting salary and ERE costs that were charged to the Research and Development Cluster were not approved, as shown in Table 1, page 184. 1 ERE are determined by applying the appropriate percentage to actual salary expense. Benefits provided to employees, which may include health, dental, long-term disability, retirement, unemployment compensation, qualified tuition remission—employee, termination leave, employee wellness, FICA taxes, workers compensation, and liability insurance. Employees are charged a flat fringe benefit rate regardless of participation. University of Arizona. ERE Rates Overview and FAQs. Retrieved 11/28/25 from https://finance.arizona.edu/accounting/ere-rates/ overview Effect The University’s not approving the effort-certification reports or approving them late increased the risk that the University received $4,849,561 in Research and Development Cluster monies it was not entitled to and may be required to repay to the federal agency. In fact, for 1 of the employees for whom a principal investigator failed to approve effort-certification reports, the University informed us that it improperly paid this former employee $99,762 of salary and ERE for approximately 1 year and 10 months past the employee’s resignation date in June 2023. The University placed a hold on the former employee’s Arizona State Retirement System (ASRS) account and reclaimed the employee’s and employer’s ASRS contribution amounts, resulting in a recovery of $21,648. The University’s improper payments to the former employee resulted in a net loss of $78,114 to the University as of June 30, 2025.2 However, the University reimbursed the Research and Development Cluster by transferring the costs to State appropriated funds for local funding of departments in May 2025; therefore, no questioned cost resulted from this instance of noncompliance. Finally, the University is at risk that this finding applies to other federal programs it administers. 2 Arizona Auditor General. (2025). Report on Internal Control and on Compliance Year Ended June 30, 2025. Retrieved 02/9/2026 from https:// www.azauditor.gov/sites/default/files/2026-02/UniversityofArizonaJune30_2025ReportonInternalControlandonCompliance.pdf Cause Despite periodic notifications by the University’s Sponsored Projects Services, the principal investigators or supervisors either did not review and approve effort certification reports or approved the effort certification reports after the 30-working-day requirement because the policies and procedures for effort certification do not contain enforcement actions for noncompliance. In addition, the University’s policies and procedures did not provide separate time frames for the 2 required effort-certification report reviews, including the fiscal officers and principal investigators or supervisors, to approve the effort-certification reports. For example, for 2 effort-certification reports we tested that were 5 and 17 days late, the principal investigators were given limited time to complete their reviews after the fiscal officers approved the reports in 26 and 28 working days, respectively. Criteria Federal regulation requires the University to base charges to federal awards for salaries on records that accurately reflect the work performed. These records must comply with the University’s established accounting policies and procedures. Federal regulation also allows budget estimates to be used for interim accounting purposes, provided that the University’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the federal award is accurate, allowable, and properly allocated (2 CFR §200.430[g][1]). University policies and procedures require the University to perform periodic after-the-fact reviews of effort certification reports that include budgeted percentages charged to the federal awarding agency and the distribution of salary and ERE costs based on budgeted percentages amongst all applicable federal awards. These policies and procedures require a fiscal officer to perform the first review and approval of the effort-certification report in the University’s financial system. Then, the principal investigators of federally sponsored projects should approve the effort-certification reports of all employees who are paid fully or partially from federal sources for work performed on a project. If the principal investigator does not have specific knowledge of the work performed, then a direct supervisor who has knowledge of work performed should approve the report. Effort-certification reports are due within 30 working days of the document-creation date in the University’s financial system.3,4 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 3 University of Arizona. Research & Partnerships – Effort Reporting Policy. Retrieved 11/18/2025 from https://research.arizona.edu/researchsupport 4 University of Arizona. Research & Partnerships – Effort Reporting Procedure. Retrieved 11/18/2025 from https://research.arizona.edu/ research-support Recommendations to the University 1. The principal investigators or supervisors should approve the effort-certification reports within the required 30-working-day time frame. The University should improve its written policies and procedures over effort-certification to include: 2. Enforcement actions when principal investigators or supervisors do not approve the effort certifications within the required time frame. 3. Establish separate time frames in the approval process over effort-certification reports for fiscal officers and principal investigators and supervisors. Views of responsible officials University management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-027 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN Number(s) 10.557 - Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award 205MS707W5003 (10/1/2019 – 9/30/2021) 215MS707W5003 (10/1/2020 – 9/30/2022) 235MS704W1003 (10/1/2022 – 9/30/2023) 235MS704W1006 (10/1/2022 – 9/30/2023) 245MS704W1003 (10/1/2023 – 9/30/2024) 245MS704W1006 (10/1/2023 – 9/30/2024) PAN-WIC-ARPA-TECH-IMPL (5/23/2023 – 9/30/2027) Questioned Costs N/A Criteria The Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. The Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During testwork performed over allowable costs requirements for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
DEPARTMENT OF HEALTH ELIGIBILITY Significant Deficiency Immaterial Noncompliance 2024-028 Strengthen Controls to Ensure Compliance with Eligibility Requirements of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program ALN Number(s) 10.557 - Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award 225MS704W1006 (10/1/2021 – 9/30/2023) 235MS704W1006 (10/1/2022 – 9/30/2023) 245MS704W1006 (10/1/2023 – 9/30/2024) Questioned Costs N/A Criteria Applicants for WIC program benefits are screened at WIC clinic sites to determine their WIC eligibility. Eligibility requirements include the following: a. Categorical – Eligibility is restricted to pregnant, postpartum, and breastfeeding women, infants, and children up to their fifth birthday. b. Identity and Residency – Except in limited circumstances, WIC applicants must be physically present for eligibility screenings and provide proof of identity and residency. An applicant also must meet the state agency’s residency requirements. c. Income – An applicant must meet an income standard established by the state agency or be determined to be automatically (adjunctively) income-eligible based on documentation of his/her eligibility, or certain family members’ eligibility, for the following federal programs: (1) Temporary Assistance for Needy Families; (2) Medicaid; or (3) Supplemental Nutrition Assistance Program (formerly the Food Stamp Program). State agencies also may determine an individual automatically income-eligible based on documentation of his/her eligibility for certain state-administered programs. d. Income Guidelines – The income standard established by the state agency may be up to 185 percent of the poverty income guidelines issued annually by HHS or state or local income guidelines used for free and reduced-price health care. However, in using health care guidelines, the income guidelines for WIC must be between 100 and 185 percent of the poverty income guidelines. The Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During testwork performed over eligibility requirements for the Special Supplemental Nutrition Program for Women, Infants, and Children program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that WIC participants met all eligibility criteria. The auditor noted the following: • For 2 of 40 timesheets selected for testing, the Department was unable to provide documentation that the participants met the income eligibility requirements.. • For 1 of 40 employees, the Department was unable to provide documentation that the participant met the residency requirement. Cause The Department’s procedures and controls were not sufficient to ensure that WIC participants met all eligibility criteria or that documentation of participants’ eligibility was maintained. Effect There is an increased risk of ineligible individuals receiving benefits under the program. Recommendation We recommend the Department review and update its procedures and controls to ensure that only eligible participants receive benefits under the program. Eligibility documentation should be maintained and readily available for audit. Repeat Finding No. Statistically Valid Yes.
DEPARTMENT OF HEALTH PERIOD OF PERFORMANCE Significant Deficiency Immaterial Noncompliance 2024-029 Strengthen Controls to Ensure Compliance with Period of Performance Requirements of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program ALN Number(s) 10.557 - Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award 205MS707W5003 (10/1/2019 – 9/30/2021) 215MS707W5003 (10/1/2020 – 9/30/2022) 235MS704W1006 (10/1/2022 – 9/30/2023) Questioned Costs $1,080,447 Criteria A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. Any costs incurred before the federal awarding agency or pass-through entity made the federal award must be authorized by the federal awarding agency or pass-through entity. A period of performance may contain one or more budget periods. The Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During testwork performed over eligibility requirements for the Special Supplemental Nutrition Program for Women, Infants, and Children program as of June 30, 2024, the Department of Health (Department) charged costs to federal grants that were after the end date of the grants’ allowable period of performance. The auditor noted the following: • the Department claimed $118,651 against a grant agreement that ended on September 30, 2021, and $938,319 against a grant agreement that ended on September 30, 2022. Three of forty samples tested for a total of $23,477 were incurred after the grant award end date. Cause The Department’s procedures and controls were not operating sufficiently to ensure that expenditures charged to the program were incurred within the awards’ period of performance. Effect Costs could be deemed unallowable by the awarding agency if funds are expended and/or obligated after the allowable period of performance. Recommendation We recommend the Department review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Repeat Finding No. Statistically Valid Yes.