Finding Number: 2023-067 Prior Year Finding Number: 2022-061 Compliance Requirement: Special Tests and Provisions – Program Governance Program: U.S. Department of Health and Human Services Government Department/Agency:Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – A Head Start Agency (HAS) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). Head Start governing body has a legal and fiscal responsibility for the HSA. The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: - approval of all major financial expenditures of the agency; - annual approval of the operating budget of the agency; - selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and - monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – When evaluating DHS’ compliance with the above-mentioned compliance requirements, we found the following: - DHS was unable to validate that they provided training and technical assistance to the governance board during the fiscal period under review. - Financial information is not shared with the governing board monthly. We observed financial information being shared quarterly. - We found no discussion by the governing board relating to monitoring of DHS’ actions to correct audit findings. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to program governance training and technical assistance to governing body and policy council. There should be regular training that will enable the governing body to perform it’s legal, fiscal, and oversight responsibilities. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Governing Board transitioned to virtual meetings due to the pandemic, which pre-empted the FY22 training, and has incorporated electronic voting into its procedures. Regular trainings are now conducted to enable the governing body to effectively perform its legal, fiscal, and oversight responsibilities. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-068 Prior Year Finding Number: 2022-064 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – DHS must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements selected by the Territory in its approved Plan. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The CCDF program appears to have policies and procedures in place for eligibility determinations and childcare provider voucher preparation and distribution. However, DHS was unable to provide a complete listing of childcare provider voucher distributions that includes relevant information to test eligibility of recipients. As a result, it appears DHS did not perform a reconciliation of the benefits paid to eligible participants and the expenditures recorded in the general ledger. Further, internal controls were not operating at a level of precision to ensure compliance with the eligibility compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements and general compliance principles. Approximately $1.0 million was expended for child care vouchers. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Recommendation - We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) has introduced a checklist as an additional internal control measure to ensure compliance with Federal requirements for review of provider enrollment applications by the provider relations staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-069 Prior Year Finding Number: 2022-065 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – The annual appropriations law for CCDF Discretionary Funds (Assistance Listing 93.575), the CARES Act (Pub. L. No. 116-136), and the CRRSA Act (Pub. L. No. 116-260) all specify that funds shall be used to supplement, not supplant State general revenue funds for child care assistance for low-income families. Funds appropriated by the ARP Act (Pub. L. No. 117-2) shall be used to supplement and not supplant other federal, state, and local public funds expended to provide child care services for eligible individuals. In accordance with the Compliance Supplement, the State or Territory: - May not spend on administrative costs more than five percent of total CCDF awards expended (i.e., the total of Assistance Listings 93.575, 93.596, and 93.489 with the exception of any ARP Act stabilization funds and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (42 USC 9858c(c)(3)(C); Pub. L. no. 116-20; CFR section 98.52). - Quality Earmark – For FY 2020 and succeeding fiscal years, states and territory Lead Agencies must spend on quality activities, as provided in the state/territorial plan, not less than nine percent of CCDF funds expended (i.e. the total of Assistance Listing 93.575, 93.596, and 93.489 with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (45 CFR section 98.53). States and territory Lead Agencies must spend at least an additional three percent on quality improvement for infants and toddlers (45 CFR section 98.50(b)). - Direct Spending Earmarks - (1) From the aggregate amount of Discretionary funds (Assistance Listing 93.575) and Disaster Relief funds (Assistance Listing 93.489) provided for a year (with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds used for construction or major renovation), state Lead Agencies, territory Lead Agencies, as well as those tribal Lead Agencies with allocations of at least $250,000 must reserve funds for administrative costs (described above) and the minimum amount required for quality activities (described above). (2) From the remainder, the Lead Agency must use not less than 70 percent to fund direct services. In addition, states and territories must spend not less than 70 percent of the Mandatory and federal and state share of Matching funds (Assistance Listing 93.596) to provide child care assistance to families who: (a) receive Temporary Assistance for Needy Families (TANF); (b) are attempting through work activities to transition of TANF; and (c) are at risk of becoming dependent on TANF (45 CFR section 98.50(e) and (f)). Direct spending requirements do not apply to supplemental funds provided by the CARES Act (Pub. L. No. 116-136), the CRRSA Act (Pub. L. No. 116-260) and the ARP Act (Pub. L. No. 11702). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We discussed with management the process to ensure compliance with the level of effort requirement noting they do not appear to have adequate policies and procedures to monitor and ensure compliance with level of effort requirements. In addition, for one project that ended during the fiscal year, management was unable to provide a final ACF-696 Financial Reporting Form for State and Territory Child Care and Development Fund (CCDF) Lead Agencies that reconciled to accounting records. As such we are unable to determine if the Administrative, Quality and Direct Spending earmarks for this project have been met. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – DHS is not in compliance with the stated provisions. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS acknowledges the need to strengthen policies, procedures, and monitoring controls to ensure consistent compliance with the Child Care and Development Fund (CCDF) matching, level of effort, and earmarking requirements, as well as to ensure that final financial reporting fully reconciles to accounting records. DHS also emphasizes maintaining internal controls to support timely, accurate federal reporting. While the Child Care program does not require local matching funds, DHS will include the GVI-approved spending plan (in addition to ERP budget journals) with audit submissions so auditors can readily confirm any applicable matching requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-070 Prior Year Finding Number: 2022-067 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – Pursuant to CCDF regulations at 45 CFR 98.65(g), and as part of the terms and conditions of the grant award, States and Territories are required to complete and submit a quarterly financial status report (ACF-696). The form must be submitted quarterly (reports are due 30 days after the end of the quarter). States must submit quarterly reports for each federal fiscal year until all funds are expended or when the liquidation period expires. Since CCDF funds are awarded each federal fiscal year, a Lead Agency might submit multiple separate quarterly ACF-696 forms for multiple overlapping grant award years simultaneously. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 9 reports of 31 reports expected to be filed during the fiscal year. During our testing, we found the following: - 8 financial reports had not been submitted in a timely manner, ranging from 95 to 399 days late. - 1 financial report that did not appear to be submitted as required. - 8 financial reports where we could not determine if the amounts reported were complete and accurate. Further, internal controls were not operating at a level of precision to ensure compliance with the reporting compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Federal Grants Financial Analyst for CCDF program has been hired and is tasked with ensuring the accuracy and submission of financial reports. Internal controls have been established, requiring final review and approval by a supervisor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-071 Prior Year Finding Number: 2022-068 Compliance Requirement: Special Tests and Provisions – Health and Safety Requirements Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – As part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address 11 specific areas—including first aid and CPR, safe sleeping practices, and administration of medication—and child care workers must be trained in these areas (42 USC 9858c(c)(2)(I); 45 CFR section 98.41). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that nonfederal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 9 of 66 child care providers and noted no evidence of monitoring of the child care service providers for applicable minimum health and safety requirements. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of child care expenditures charged to the program were $1,020,396. Total amount sampled is $315,509. Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements are documented throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS remains in compliance with this finding from previous audit years, the untimely submission led to the issue in current year. To address this, a shared file will be established to ensure that the necessary information for each year is readily available for audit purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-072 Prior Year Finding Number: 2022-069 Compliance Requirement: Special Tests and Provisions – Fraud Detection and Repayment Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud (45 CFR section 98.60). The Lead Agency must correctly identify and report fraud and take steps to recover payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While DHS has a procedure for identifying and recovering payments resulting from fraud, via its internal audit process, it was unable to evidence that such audit(s) had been conducted during the fiscal year. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud that may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance with fraud detection and repayment requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS is in the process of developing an internal audit and compliance unit. With the requisite staffing, internal audits will be conducted to ensure alignment with the Federal mandates in addition to ensuring overall compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-073 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Child Care Provider Eligibility for ARP Act Stabilization Funds Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – To be qualified to receive ARP Act stabilization funds, a provider on the date of application for the award must either be: (1) open and available to provide child care services, or (2) closed due to public health, financial hardship, or other reasons relating to the COVID-19 public health emergency. In addition, the provider must either (1) be eligible to serve children who receive CCDF subsidies at the time of application for stabilization funds, or (2) be licensed, regulated, or registered in the state, territory, or tribe as of March 11, 2021 and meet applicable state and local health and safety requirements at the time of application for stabilization funds. In their application for stabilization funds, a child care provider must certify: a. That the provider will, when open and providing services, implement policies in line with guidance and orders from corresponding state, territorial, tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the CDC. b. For each employee, the provider must pay at least the same amount in weekly wages and maintain the same benefits for the duration of the stabilization funding. c. The provider will provide relief from copayments and tuition payments for the families enrolled in the provider’s program, to the extent possible, and prioritize such relief for families struggling to make either type of payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected a sample of 10 of 45 child care providers that received ARP Act stabilization funds. During our testing, were not provided evidence to substantiate that the child care providers selected for testing were eligible to receive ARP Act stabilization funds. Further, internal controls were not operating effectively to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of ARP Act stabilization expenditures charged to the program were $14,833,930. Total amount sampled is $4,572,894. Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the ARP Act stabilization provider eligibility requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS is in the process of developing an internal audit and compliance unit. With the requisite staffing, internal audits will be conducted to ensure alignment with the Federal mandates in addition to ensuring overall compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-074 Prior Year Finding Number: 2022-071 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 60 of 1,380 payroll transactions and noted the following: - 2 instances in which the project code on an employee’s Notice of Personnel Action (NOPA), which is used to record time and effort to the appropriate grant, was expired and had not been updated. During the fiscal year, program personnel did make adjustments to ensure the employee’s time and effort was recorded to the correct grant. - 1 instance in which the hours noted per the employee’s timesheet did not agree to the hours in the payroll register. We also sampled 60 of 251 non-payroll transactions and noted the following: - 18 expenditures that do not seem to conform to DHS requirements for disbursing program funds. - 6 instances where the approved requisition was not available for review. - 1 instance where the invoice date is prior to the date of the Purchase Order. - 1 instance where no supporting documentation was available for review other than the approved requisition. Questioned Costs – Not determinable. Context – This is a condition identified per review of compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2023 were $3,343,590. Total amount sampled is $180,273. The known amount of the exceptions is $408. Total amount of non-payroll expenditures charged to the program in fiscal year 2023 were $2,551,775. Total amount sampled is $1,004,88. The known amount of the exception is $388,742. Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll and non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) adopted the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance are approved through management levels, with payroll based on Notice of Personnel Action (NOPA) cost centers. Financial Analysts reconcile payroll, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-075 Prior Year Finding Number: 2022-072 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – A Non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Additionally, the Uniform Guidance in 2 CFR Section 200.344(b), states that unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 10 out of 91 expenditures recorded during the grant’s liquidation period. We found 6 expenditures that were charged to the grant during the liquidation period and incurred outside the period of availability. Such expenditures totaled $7,081. Additionally, internal controls do not appear to be operating at a level of precision to ensure grant expenditures are charged to the correct grant and within the allowable period of performance. Questioned Costs – $7,081. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures subject to sampling were $56,385. Total amount sampled is $12,211. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. As part of the close-out process, all open purchase orders are now submitted to the Department of Finance for closure. The grant close-out process has been shifted to the OMB to ensure the grant is no longer available for transaction entries or liquidations. Additionally, a dedicated Fiscal Analyst is being integrated into the workflow to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-076 Prior Year Finding Number: 2022-073 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance Supplement, the states and territories are required to submit to the Federal administering agency, the Office of Community Services (OCS), SF-425 ‘Federal Financial Report’ and an annual ‘Post Expenditure Report’ (42 USC 1397e) no later than six months following the close of the fiscal year. Further, in accordance with OCS SSBG Supplemental Terms and Conditions, SSBG is required to submit an interim and final SF- 425 report covering Year 1 and the entire 2-year of the project period, 90 days following Year 1 (FFY 1) and 90 days following the end of Year 2 (FFY 2), respectively. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 2 out of 4 financial (SF-425) and special (Post-Expenditure) reports and noted the following: - 1 financial report was not available for review. - For 1 special report, we noted no evidence of the date the report was prepared, reviewed, and submitted to the Federal grantor. Additionally, we were not able to agree the key line item of the report to the underlying records. Additionally, internal controls do not appear to be operating at a level of precision to ensure federal reports are prepared accurately, reviewed and submitted timely, and maintained for inspection. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect - DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Currently, there is a collaboration with Federal Partners to consolidate reporting in the Payment Management System portal, as there is no single report for the SSBG as required. Report requests are currently inconsistent with one consolidated grant. Additionally, pre and post expenditures are submitted through the portal, accompanied by a submission log. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-077 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Federal funds can be used only for Medicaid and CHIP benefit payments (as specified in the state plan, federal regulations, or an approved waiver/demonstration), expenditures for administration and training, expenditures for the State Survey and Certification Program, and expenditures for the establishment and operation of state MFCUs (42 CFR 435.10, 440.210, 440.220, and 440.180). Payments may only be made to providers determined by the SMA to be eligible to participate in the Medicaid program. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – DHS was unable to provide a reconciliation of claims paid between the Medicaid Management Information System (MMIS) and the general ledger, which is used to prepare the Schedule of Expenditures of Federal Awards (SEFA). Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Effect – DHS is not in compliance with the stated provisions. Failure to properly review and report expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with stated provisions. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure monitoring and compliance of stated requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will strengthen internal controls by implementing clearer, auditable reconciliation processes to support SEFA preparation and demonstrate compliance. DHS will continue coordinating with auditors and stakeholders to ensure required documentation is received and compliance can be readily determined. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-078 Prior Year Finding Number: 2022-075 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition – In our review of 60 out of 34,534 participant case files, we noted 29 instances where there was no documentation to support the eligibility determinations made. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review and maintenance of the data in its participant case files. Recommendation – We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Currently, a Standard Operating Policies and Procedures (SOPPs) for certification and recertification procedures is being updated. Additionally, DHS hired a Program Integrity Director in August 2023 and Medical Eligibility Quality Control (MEQC) Reviewer in June 2025 also tasked with the responsibility of reviewing completed case files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-079 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – The state is required to pay part of the costs of providing Medicaid and CHIP services and part of the costs of administering the program. The percentage of federal funding is determined based on the amount of the expenditure and the application of the FMAP that is determined for each state using a formula set forth in section 1905(b) of the Act (42 USC 1396d), or other applicable federal matching rates specified by the statute. In particular, the matching rates for states’ administrative expenditures authorized by the Act are found in section 1903(a) of the Act (42 USC 1396b). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – DHS was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Therefore, we were unable to determine if the matching requirement has been met. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles and matching compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Effect – DHS is not in compliance with the stated provisions. Failure to properly review and report expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with stated provisions. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure monitoring and compliance of stated requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-080 Prior Year Finding Number: 2022-076 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the reports did not contain evidence of review or approval. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. To ensure access for audit purposes, the Department has implemented a shared folder where copies of approval emails and any time extension requests are stored, since the submission portal does not allow for attachments. Additionally, a Director of Federal Grants has been on-boarded who will assume the role of preparing the reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-081 Prior Year Finding Number: 2022-077 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Criteria – The state plan must provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, the state must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Credible allegations of provider fraud must be referred to the state MFCU or an appropriate law enforcement agency in states with no certified MFCU (42 CFR Part 455.21). The SMA must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. The SMA may conduct this review directly or may contract with an independent entity (42 CFR 456.5, 456.22 and 456.23). In addition, the SMA as required per Section 1902(a)(68) – [42 USC 1396a(a)(68)] False Claims Education must ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Upon investigation, DHS was not able to provide evidence of compliance with the above referenced compliance requirements. Specifically, we found the following: - No evidence of a method of determining criteria for identifying suspected fraud cases. - No evidence of a method for investigating these cases. - No evidence of procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. Further, we noted DHS had not provided evidence of established and used written criteria for evaluating the appropriateness and quality of Medicaid services, including procedures for the ongoing post-payment review. Additionally, DHS did not provide evidence they ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Finally, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause – DHS does not appear to have an effective system in place to address the program’s requirements. Recommendation – DHS should reconsider whether it would like to be directly responsible for Utilization Control and Program Integrity, or if the use of a QIO would better suit current needs. Once this is decided, DHS should take the necessary steps to ensure compliance with this requirement. The written procedures should reflect the actual actions to be taken. In the event a QIO is used, DHS should be involved throughout, so that it is aware of the program’s vulnerabilities and has the opportunity to make the necessary changes for improvement in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Program Integrity Unit has established SOPPs which identifies the method for identifying fraud cases, investigating cases, and developed procedures in collaborating and cooperating with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-082 Prior Year Finding Number: 2022-078 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Criteria – The SMA pays for inpatient hospital services and long-term care facility services through the use of rates that are economic and efficient and are in accordance with the state plan. To the extent the state pays reconciled costs, the SMA must provide for the filing of uniform cost reports for each participating provider in order to establish payment rates. The SMA must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the state plan (42 CFR 447.253). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third-party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2023. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Recommendation – We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Department of Human Services intends to shift the responsibility of Cost Reports internally to the Fiscal Office, under the supervision of Director of Audit and Compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-083 Prior Year Finding Number: 2022-079 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Criteria – SMAs must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate and cost-effective safeguards are incorporated into new and existing systems. SMAs must perform risk analyses whenever significant system changes occur. SMAs shall review the ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR 95.621). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS performed two ADP Risk Analysis and System Security Reviews for the systems that support the Medicaid Programs. A SOC1, Type 2 review was performed over the MMIS system covering the period October 1, 2022 through September 30, 2023 as well as a Cybersecurity review released in September 2024. Both reviews were performed by third-party organizations. Upon review of the reports, we noted the following: - The SOC1, Type 2 contained a qualified opinion stating that controls were not operating effectively to prevent unauthorized changes to the application and supporting infrastructure. - They Cybersecurity review was performed outside of fiscal year 2023. Additionally, the conclusion reached noted several critical vulnerabilities that need immediate attention. We did not note any analysis performed by DHS to assess the risk of the opinion qualification over their internal control environment nor the steps being taken to remedy the critical vulnerabilities noted in the Cybersecurity review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Further, DHS’ risk of incomplete or inaccurate data processing, or worse, the risk of fraud, increases. Cause – DHS’ records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Recommendation - We recommend that management should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by management. If management becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS has conducted an overall cybersecurity risk assessment for entire IT infrastructure. The strategy to become compliant with the VIBES System Security Review includes updating the scope of work with contracted vendor for this system. The scope of work will now include annual Risk Assessments and Security Reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-084 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Provider Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Medicaid – In order to receive Medicaid payments, providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the Medicaid program (42 CFR 431.107 and 447.10; and Section 1902(a)(9) of the Act (42 USC 1396a(a)(9)); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR Part 455, Subpart B, sections 455.100 through 455.106). Medicaid managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the Medicaid program (see 42 CFR 455.436). CHIP – In order to receive CHIP payments, CHIP providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the CHIP program (42 CFR 457.900); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR 457.990(a), cross referencing 455.107). CHIP managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Guidance was provided to states in the Medicaid Provider Enrollment Compendium (MPEC) to enroll CHIP providers into their Medicaid programs to ensure that they meet federal requirements. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the CHIP program (42 CFR 457.990, 42 CFR 455 Subpart E). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled 20 of 194 providers that provided Medicaid and CHIP services during fiscal year 2023. DHS was unable to provide documentation that the providers selected were: - screened, licensed, and enrolled in accordance with the state plan and the requirement of 42 CFR 455 Subpart E. - comply with the requirements of the state plan, including the disclosure requirement of 42 CFR 455 Subpart B. - comply with the requirements of the state plan, including the disclosure requirements of 42 CFR 455 Subpart B and Section 1.4 of the MPEC. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of cous and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure documentation is maintained and available to be inspected. Recommendation - We recommend that DHS implement policies and procedures to ensure provider enrollment documentation is maintained and available for inspection. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS continues working with a vendor on the implementation of the Provider Enrollment Application (PEA). Beginning in February 2026, the vendor will assume responsibility for enrolling all USVI providers—both in-territory and out-of-territory. Their enrollment process will address the three bulleted conditions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-085 Prior Year Finding Number: 2022-081 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 11 projects with first-tier subawards greater than $30,000 and found that internal controls over compliance with FFATA reporting provisions had not been implemented. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – Lack of internal controls over compliance may lead to material noncompliance with stated provision. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A formalized process for the preparation and submission of financial and performance reports is now established, with clearly defined roles and responsibilities. The Disaster Program Financial Specialist is tasked with preparing the reports quarterly and submitting them to the Territorial Public Assistance Officer for review. The reports and associated certifications will be placed in a centralized database. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-086 Prior Year Finding Number: 2022-082 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 8 of 27 subrecipients and found the following: - 4 instances where we were unable to obtain subrecipient agreements. - 8 instances with no supporting documentation that VITEMA verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2023 was $134,242,935. The total amount of our sample totaled $124,398,401. Effect – VITEMA is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the program's objectives. Cause – VITEMA does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VITEMA implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The formal process for completing and retaining Subrecipient Agreements is now operational to ensure compliance with programmatic obligations. As the Recipient, the Territory is responsible for notifying the Subrecipient when federal funds are obligated and providing them with a subrecipient agreement outlining the program's terms and conditions. The Disaster Program Financial Specialist is responsible for ensuring that the subrecipient agreement is signed by both the Applicant and the Governor's Authorized Representative and provided to the Territorial Public Assistance Officer. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-087 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Homeland Security Grant Program ALN: 97.067 Award#: Various Award Periods: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. As directed by section 2008(b)(2) of the Homeland Security Act of 2002 (codified as amended at 6 USC 609(b)(2)), all personnel and personnel-related costs, including those of intelligence analysts and operational overtime, are allowed up to 50 percent of HSGP funding without time limitation placed on the period of time that such personnel can serve. FEMA may provide a waiver at the request of the recipient to allow personnel expenses to exceed 50 percent of the amount awarded. Condition – It appears that controls do not exist, such as monitoring controls, to ensure VITEMA is in compliance with the earmarking requirements at the end of each grant period. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements. Effect – An ineffective control system related to monitoring of earmarking requirements can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VITEMA does not appear to have adequate policies and procedures to ensure compliance with the earmarking requirements and ensure that an appropriate level of monitoring is completed prior to closing out of the grant. Recommendation – We recommend that VITEMA reevaluate and improve internal controls to ensure each grant is monitored throughout its life to ensure compliance with the earmarking requirement at the end of a grants period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. This information is documented in BSIR as part of the submittal process and does not allow for the submittal of reporting if not verified to meet this requirement. VITEMA will also document this information when preparing the SF 425 report by including this information in the notes section of this report. This will be conducted on a quarterly basis. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2023-088 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Homeland Security Grant Program ALN: 97.067 Award#: Various Award Periods: Various Criteria – Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 2 of 3 projects with first-tier subawards greater than $30,000 and found the following: - No evidence of review of the reporting prior to submission. - We are unable to verify the timeliness of FFATA reporting. - We are unable to agree amounts reported to adequate source documentation. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – A lack of internal controls over compliance may lead to material noncompliance with stated provision. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VITEMA's Deputy Director of Grants Management will review the FFTA information and validate that the information is true and correct based on the amount approved by DHS and sub-recipient agreement. This FFTA document will be signed and dated by the Deputy Director of Grants Management within the 30 days of required enrollment The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding No.: 2023-011 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $100,327 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: Of 43 non-payroll transactions tested, aggregating $5,876,660 of $31,535,023 in total non-payroll program expenditures, we noted the following: 1. For 1 (or 2%), cost was not adequately documented due to lack of supporting vendor invoice: Item # Fund # Encumbrance/ Voucher/JV # Account Total 1 10402 22/00003564 BRV Contractual Services $ 100,000 2. For 7 (or 16%), the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions state that assistance under the awards may not be sub-granted or transferred. However, $1,847,500 of the grant assistance was disbursed directly to the Enewetak/Ujelang Local Government (EULGOV) and a subgrant agreement with EULGOV was not available. This item is also reported as a matter of noncompliance within Finding 2023-019, including associated questioned costs. Therefore, no questioned cost is presented at this finding. Condition 2: Of 25 payroll transactions tested, aggregating $20,005 of $18,441,905 in total payroll program expenditures, we noted the following: 1. For 3 (or 12%), leave hours were not supported by an approved leave form: Item # Employee # PPE Hours Amount 1 206603 11/19/2022 8 $ 50 3 090465 12/03/2022 24 196 2 04093566 03/11/2023 8 81 $ 327 2. For 1 (or 4%), direct payment to EULGOV was in breach of the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions, as noted under Condition 1 item 2 above. No questioned cost for these awards is presented at this finding. Cause: RepMar did not effectively maintain documentation to support expenditures charged to federal programs and did not effectively monitor the validity and allowability of expenditures. Furthermore, RepMar lacks adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $100,327. Identification as a Repeat Finding: Finding Nos. 2022-001 and 2022-002 Recommendation: Documents supporting expenditures should be maintained. Further, RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Finally, RepMar should adopt adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-015 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $22,743 Area: Period of Performance Criteria: Grant agreements stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 1 (or 8%) of 13 transactions tested aggregating $30,782 of $733,055 non-payroll expenditures, the vendor invoice was not provided to verify that the cost was not incurred prior to the funding period stipulated in the grant award. Item # Fund # Voucher # Encumbrance # Total 1 10408 22/00001585 JOURNAL F0178101 $ 1,655 Condition 2: For 4 (or 9%) of 44 transactions tested aggregating $312,418 of $7,510,168 in non-payroll expenditures, the vendor invoice was not provided to verify that the cost was not incurred subsequent to the funding period stipulated in the grant award. Item # Fund # Voucher # Encumbrance # Total 1 10401 22/00003877 INVOICE 22/00002357 PORDER $ 355 2 10401 22/00003876 INVOICE 22/00002214 PORDER 111 3 10409 22/00003970 INVOICE 22/00001885 PORDER 320 4 10406 22/00010031 PV 22/00002158 BRV 20,302 $ 21,088 Condition 3: Expenditures totaling $2,050,741 were charged to grant award nos. D23AF00042-00 and D23AF00074-00 utilizing a single project code (SPG # 70110100). The two grant awards have different periods of performance. Compliance with period of performance requirements related to award no. D23AF00074-00 for costs totaling $688,542 could not be ascertained. Questioned costs, if any, that may result from this condition are not determinable. Condition 4: For the Four Atolls Health Care program, the applicable grant agreement covering the period from 10/01/2022 to 01/31/2023 was not made available. Therefore, compliance with period of performance requirements could not be ascertained. Questioned costs, if any, that may result from this condition are not determinable. Cause: RepMar did not effectively maintain documentation and did not establish a unique project code for each grant award to verify compliance with period of performance requirements. Effect: RepMar is in noncompliance with applicable period of performance requirements. Accordingly, questioned costs of $22,743 result from conditions 1 and 2 because the projected questioned cost exceeds the $25,000 threshold. Identification as a Repeat Finding: Finding No. 2022-005 Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of documentation to support all transactions and establish a unique project code for each grant award. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-016 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $314,943 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar’s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. The RMI Procurement Regulations Pursuant to the Procurement Code Act 1988 (RMI Procurement Regulations) Sections 5 and 6 stipulate procedures pertaining to suspension or debarment of persons who shall not be considered for award of contracts. 2 CFR 200.214 states that recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 8 (or 12%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions subject to procurement requirements, there was no procurement file provided to substantiate compliance with applicable procurement requirements as follows: Item # Fund # Voucher # Amount 1 10410 22/00001589 JOURNAL $ 11,581 2 10409 22/00001587 JOURNAL 167,852 3 10401 22/00003286 PINVOICE 21,178 4 10406 22/00003856 PINVOICE 9,950 5 10406 22/00005332 PINVOICE 10,275 6 10401 22/00000717 PINVOICE 23,247 7 10406 22/00005350 PINVOICE 24,995 8 10406 22/00001939 PINVOICE 10,437 $ 279,515 Condition 2: For 3 (or 5%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions, the procurement documentation is insufficient to support the rationale for vendor selection in accordance with 2 CFR section 200.323 and 48 CFR section 15.404-3. Item # Fund # Voucher # Amount 1 10402 22/00003565 PINVOICE $ 4,784 2 10402 22/00004883 PINVOICE 5,000 3 10406 22/00002441 PV 660 $ 10,444 For 9 (or 14%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions, supporting procurement documentation was not sufficient to substantiate compliance with applicable procurement requirements as follows: Item # Fund # Voucher # Amount 1 10402 22/00004885 PINVOICE $ 5,000 2 10402 22/00005513 PINVOICE 1,430 3 10406 22/00003035 PV 508 4 10406 22/00011377 PV 4,870 5 10406 22/00000549 PV 336 6 10403 22/00011927 PV 2,319 7 10401 22/00001875 PINVOICE 2,195 8 10402 22/00003839 PV 2,565 9 10402 22/00000269 PV 5,761 $ 24,984 No quotations/ cost comparison were provided for the items. The procurement documentation is insufficient to demonstrate compliance with applicable procurement requirements. Condition 4: Documented evidence of compliance with RMI Procurement Regulations and 2 CFR 200.214 and 2 CFR 180.300 regarding debarred, suspended, or otherwise excluded persons or entities was not made available. Cause: RepMar did not enforce internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. The reportable questioned cost is $314,943. Identification as a Repeat Finding: Finding No. 2022-006 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $5,166,243 Area: Subrecipient Monitoring Criteria: 1) Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore, Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. 2) In accordance with applicable subrecipient monitoring requirements, the pass-through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies detected through audits, on-site reviews, and other means, pertaining to the Federal awards provided by the PTE to the subrecipient. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition 1: For 12 (or 100%) subawards tested, no documented evidence was made available to demonstrate that the Ministry of Finance, Banking and Postal Services (MOFBPS) effectively monitored subrecipient activities. Consequently, we were unable to ascertain whether MOFBPS monitored subrecipient compliance with subaward agreements, Compact Agreement, grant award, and the FPA. Item # Subrecipient Fund # Sub-Grant 1 College of the Marshall Islands 10401 $ 987,000 2 College of the Marshall Islands 10402 388,325 3 College of the Marshall Islands 10406 125,000 4 College of the Marshall Islands 10409 500,000 5 Ebeye Christian School 10406 3,984 6 Ebeye Seventh Day Adventist 10406 54,530 7 Father Hacker High School 10406 6,695 8 Kwajalein Atoll Joint Utilities Resources (FY23 allocation) 10412 275,000 9 Kwajalein Atoll Joint Utilities Resources 10412 663,930 10 Kwajalein Atoll Joint Utilities Resources (FY22 allocation) 10412 275,000 11 Marshall Islands Scholarship Board 10401 592,202 12 Marshall Islands Scholarship Board 10406 200,000 13 Queen of Peace 10406 39,279 $ 4,110,945 Other discrepancies were also noted as follows: For item #s 1 through 4, the 4th quarter financial reports were not supported by subrecipient expenditure reports, as required by MOFBPS. Further, the subrecipient’s fiscal year 2023 Uniform Guidance audit has not been issued. Accordingly, questioned cost of $2,000,325 result. For item #s 5 through 7 and 13, the subrecipients are not subject to audit; however, questioned cost of $104,488 result, due to lack of documented evidence of subrecipient monitoring. For item #s 8 and 9, funds were disbursed in one installment payment which conflicts with Section 4 of the underlying Memorandum of Agreement which stipulates quarterly disbursement of funds. Further, the subrecipient’s fiscal year 2023 Uniform Guidance audit has not been completed. Accordingly, questioned cost of $938,930 result. Item # 10 represents a subaward to the subrecipient under award no. D22AF00007-00 for which the period of performance was from 10/01/2021 to 9/30/2023. The subaward represents FY22 allocation that was accrued in fiscal year 2023 and paid in December 2023. Funds were disbursed in a manner inconsistent with the underlying Memorandum of Agreement. Finally, the subrecipient’s fiscal year 2022 Uniform Guidance audit has not been completed. Accordingly, questioned cost of $275,000 result. For item #s 11 and 12, while there is no documented evidence of subrecipient monitoring, no finding is reported in the subrecipient’s fiscal year 2023 Uniform Guidance audit related to the subaward. For item # 12, funds were disbursed semi-annually which conflicts with Section 4 of the underlying Memorandum of Agreement which stipulates quarterly disbursement of funds, and the financial reports required by MOFBPS were not made available. No questioned cost results since the subrecipient was separately audited. Condition 2: Subrecipient monitoring schedule provided by MOFBPS was incomplete. Grant assistance under award nos. D23AF00042-00 and D23AF00074-00 aggregating $1,847,500 was sub-granted to a subrecipient that was not included in the monitoring schedule. Further, the sub-grant was prohibited by the grant award terms and conditions. Accordingly, questioned costs of $1,847,500 result. Condition 3: There was no documented evidence that RepMar monitored subrecipient cash draws to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and disbursement of funds for program purposes was minimized. Questioned costs, if any, that may result from this condition are not determinable. Cause: RepMar lacks effective internal control policies and procedures governing subrecipient monitoring, including compliance with underlying grant awards and memoranda of agreement and Compact provisions. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements. As a result, questioned cost of $5,166,243 is reported. Identification as a Repeat Finding: Finding No. 2022-010 Recommendation: RepMar should comply with the applicable provisions of the FPA and subrecipient monitoring requirements and should develop and implement effective subrecipient monitoring procedures. Furthermore, MOFBPS should enforce compliance with subaward agreements, including timely Single Audits of subrecipients, as applicable. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Area: Special Test and Provisions – Annual Performance Reviews Criteria: Education Sector NGA Section 4c. states that in furtherance of the progress made under JEMFAC Resolution 2015-MT-2 all personnel funded from Education Sector, Supplemental Education Grant (SEG) and Ebeye Special Needs (ESN) grants are required to undergo an annual performance evaluation and such evaluation shall be maintained as part of the personnel files and made available when requested for purposes of grant oversight or audits. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: We were not provided with a complete listing of personnel funded by the Education Sector, SEG and ESN grants and evidence that the annual performance evaluation was conducted for such personnel. Thus, we were unable to ascertain compliance with this grant special terms and conditions. Cause: RepMar lacks adequate internal control policies and procedures to facilitate monitoring of and compliance with grant special terms and conditions. Effect: RepMar is potentially in noncompliance with applicable special tests and provision. We were unable to execute sufficient appropriate audit procedures. Accordingly, questioned cost is undeterminable. Recommendation: RepMar should establish adequate internal control policies and procedures to facilitate monitoring of and compliance with grant special terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-012 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $558,990 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 16 (or 33%) of 49 non-payroll transactions tested, aggregating $1,851,210 of $2,079,854 in total non-payroll program expenditures, the following deficiencies were noted: Item # Encumbrance/ Voucher # SPG # COVID Non-COVID Total 1 22/00001585 Journal 10290101 $ 5,601 $ - $ 5,601 2 22/00003730 BRV 10320101 44,463 - 44,463 3 22/00001975 BRV 10134501 - 37,900 37,900 4 22/00005845 BRV 10134501 - 1,784 1,784 5 22/00001980 BRV 10580201 20,000 - 20,000 6 22/00001585 JOURNAL 10610101 - 10,000 10,000 7 22/00002210 PORDER 10134501 - 2,520 2,520 8 22/00001931 PORDER 10290101 9,240 - 9,240 9 C1491501 10320101 6,947 - 6,947 10 C14081 10290101 264,000 - 264,000 11 22/00001633 PORDER 10520101 6,322 - 6,322 12 22/00003591 BRV 10320101 2,073 - 2,073 13 22/00001491 PORDER 10580101 - 2,780 2,780 14 22/00002713 PORDER 10136401 1,350 - 1,350 15 22/00002656 PORDER 10136401 4,514 - 4,514 16 22/0001587 JOURNAL 10610101 138,900 - 138,900 $ 503,410 $ 54,984 $ 558,394 Item #s 1 and 2 pertain to security services for which there was inadequate documentation to support cost allocation to the program. Item #s 3 through 5 pertain to RepMar’s Ministry of Health and Human Services (MOHHS) utility expenditures for which there was inadequate documentation to support cost allocation to the program. Item #s 6 through 7 pertain to MOHHS communication expenditures for which there was inadequate documentation to support cost allocation to the program. Item # 8 pertains to MOHHS fuel expenditures for which there was inadequate documentation to support cost allocation to the program. Item # 9 pertains to the construction of MOHHS’s Laura Health Centre Extension, for which the grant Notice of Award (NOA) strictly prohibits construction to be charged to the program. Item # 10 pertains to the purchase of MOHHS’s Marshall Health Information System (MHIS) for which there was inadequate documentation to support cost allocation to the program. Item #s 11-15 pertain to the purchase of equipment (i.e laptops, copier machines, and duplicators), however we noted no budget for equipment per NOA. Item # 16 pertains to a transfer to the Marshall Island Police Department, we were not provided supporting documentation for us to ascertain the allowability of the activity. Condition 2: For 3 (or 27%) of 11 payroll transactions tested, aggregating $11,610 of $471,786 in total payroll program expenditures, the following deficiencies were noted: Item # Employee # PPE Hours Amount 1 04236064 10/08/2022 Unknown $ 103 2 04219081 6/3/2023 74.5 468 3 04231376 7/15/2023 4 25 $ 596 For item # 1, employee was paid an additional $103 which could not be verified due to lack of supporting calculation. Furthermore, the additional payment was not supported by documented approval. For item # 2, the employee's position is Purchasing Specialist II. Documentation of why this is a necessary and reasonable program cost was not available for examination. For item # 3, four leave hours paid were not supported by an approved leave form. The above are expenditures under COVID SPG codes and resulted in reportable questioned costs of $596 because the projected questioned cost exceeds the $25,000 threshold. Cause: RepMar lacks adequate internal control over compliance with applicable allowed and unallowed activity requirements, as well as obtaining and retaining sufficient documentation to support all transactions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $504,006 (COVID) and $54,984 (non-COVID). Identification as a Repeat Finding: Finding No. 2022-003 Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-013 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $27,059 Area: Cash Management Criteria: Compact payments shall be made in accordance with Article IV of Fiscal Procedure Agreement (FPA). Further, Article VI stipulates that to the extent that the Government of the Republic of the Marshall Islands awards Sub-Grants to local governments or other entities, it shall establish reasonable procedures to ensure the timely receipt of the reports on cash balances and cash disbursements to enable the preparation of complete and accurate transactions reports. 2 CFR section 200.305(b) states that for recipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency and the disbursement of funds by the recipient. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: RepMar does not have established cash management monitoring, which is essential for ensuring compliance with Article IV of the Fiscal Procedure Agreement. Furthermore, there is no detailed listing of expenditures supporting the drawdowns made during the year on file to ascertain whether these expenditures were incurred prior to the date of the reimbursement request, thereby hindering the preparation of complete and accurate transaction reports. Questioned costs, if any, that may result from inadequate records are not determinable. Condition 2: RepMar utilizes a cumulative deductive reimbursement method for payment, therefore, it is unable to provide or correlate when an invoice or drawdown is made. Condition 3: Internal control deficiency resulted in overdraws during the year: • $27,059 for ALN 93.323, which is not material to the program but exceeds the $25,000 threshold and thus questioned costs result. • $2,639,269 for ALN 15.875 in Fund 10309, SPG 70120100. With grantor approval, this overdraw was partially offset against grantor receivables, and the remaining $2,342,351 balance as of September 30, 2023 was reclassed to liabilities. Therefore, no questioned cost results. Cause: RepMar lacks adequate internal controls over compliance related to cash management, including the retention of documentation supporting cash drawdowns. Effect: RepMar is in noncompliance with applicable cash management requirements. Questioned cost of $27,059 results from Condition 3 ALN 93.323. Recommendation: RepMar should strengthen controls to ensure that complete and accurate transaction reports are retained to evidence compliance with applicable cash management requirements. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-014 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement states that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date and cost of the property, the percentage of Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be conducted and the results must be reconciled with the property records at least once every two years; c. A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal Agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program; d. Regular maintenance procedures must be in place to ensure the property is in proper working condition; and e. If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Capital asset records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: • An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and physical inventory has not occurred at least once in the past two years. • Capital asset records are not effectively maintained. It does not appear that RepMar has implemented an effective control system to adequately safeguard capital assets from loss, damage or theft, or to reasonably investigate such occurrences. • RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. • RepMar has not established policies and procedures to routinely assess whether impairment indicators are present and to test long-lived capital assets with impairment indicators for impairment. Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions and useful lives. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts are not effectively implemented. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, which may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding No. 2022-004 Recommendation: The Ministry of Finance, Banking and Postal Services (MOFBPS) should perform an inventory of RepMar’s capital assets as a basis for recording all assets in the financial statements, should complete such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should implement internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-017 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $6,500 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar’s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 125 – (1) contracts shall be awarded by competitive sealed bidding. (2) An invitation for bids shall be issued and shall include a purchase description and all contractual terms and conditions applicable to the procurement. (3) adequate public notice of the invitation for bids shall be given a reasonable time. (4) Bids shall be opened publicly in the presence of one or more witnesses at the time and place designated in the invitation for bid. (5) Bids shall be unconditionally accepted without alteration or correction. (c) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (d) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. The RMI Procurement Regulations Pursuant to the Procurement Code Act 1988 (RMI Procurement Regulations) Sections 5 and 6 stipulate procedures pertaining to suspension or debarment of persons who shall not be considered for award of contracts. 2 CFR 200.214 states that recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 1 (or 6%) of 17 procurement transactions tested, aggregating $89,724 of $1,985,592 in total transactions subject to procurement requirements, no procurement file was provided to substantiate vendor selection. Item # Reference # Expenditure Amount Questioned Cost 1 22/00001586 $ 4,000 $ 4,000 Condition 2: For 1 (or 6%) of 17 procurement transactions tested, aggregating $89,724 of $1,985,592 in total transactions, supporting procurement documentation was not sufficient to substantiate compliance with applicable procurement requirements as follows: Item # Reference # Expenditure Amount Questioned Cost 1 22/00002281 $ 2,500 $ 2,500 Condition 3: Documented evidence of compliance with RMI Procurement Regulations and 2 CFR 200.214 and 2 CFR 180.300 regarding debarred, suspended, or otherwise excluded persons or entities was not made available. Cause: RepMar did not enforce adequate internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Further, RepMar lacks policies and procedures requiring verification of the status of an entity with which RepMar intends to enter into a covered transaction. Effect: RepMar is in noncompliance with applicable procurement requirements. Accordingly, questioned costs of $6,500 result because the projected questioned cost amount exceeds the $25,000 threshold. Identification as a Repeat Finding: Finding No. 2022-008 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements and regulations. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection, and verification of whether an entity or person with whom RepMar intends to do business is not excluded or disqualified. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $0 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $0 Area: Reporting Criteria: Grant agreements stipulate the type and frequency of reports to be submitted. Furthermore, timely, accurate and complete reporting should be facilitated by an internal control structure conducive to the monitoring, preparation and independent review of required reports. Lastly, financial reports should reconcile with underlying accounting records. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: There are no policies and procedures requiring monitoring of reports to be submitted or listing of reports already submitted. It does not appear that RepMar has developed means to monitor compliance with reporting requirements. Condition 2 (ALN 15.875): Of 46 financial reports due in fiscal year 2023, we noted the following: a) For 20 (or 43%), the reports were not available for examination: Item # Fund # SPG Code Award # Quarter End Due Date Date Submitted 1 10406 70150200 D22AF00005-00 12/31/2022 01/30/2023 unknown 2 10406 70210100 D23AF00077-00 12/31/2022 01/30/2023 unknown 3 10406 70210200 D23AF00077-00 12/31/2022 01/30/2023 unknown 4 10406 70210400 D23AF00077-00 12/31/2022 01/30/2023 unknown 5 10409 70041000 D23AF00011-00 12/31/2022 01/30/2023 unknown 6 10409 70190100 D23AF00050-00 12/31/2022 01/30/2023 unknown 7 20103 70060100 D23AF00024-00 12/31/2022 01/31/2023 unknown 8 20103 70060101 D23AF00041-00 03/31/2023 04/30/2023 unknown 9 10406 70340103 D22AF00004-00 03/31/2023 04/30/2023 unknown 10 10408 70090100 D23AF00009-00 03/31/2023 04/30/2023 unknown 11 10409 70040600 D23AF00011-00 03/31/2023 04/30/2023 unknown 12 10409 70040700 D23AF00011-00 03/31/2023 04/30/2023 unknown 13 10409 70040900 D23AF00011-00 03/31/2023 04/30/2023 unknown 14 10409 70041000 D23AF00011-00 03/31/2023 04/30/2023 unknown 15 10409 70120100 D23AF00037-00 03/31/2023 04/30/2023 unknown 16 10409 70290100 D22AF00006-00 03/31/2023 04/30/2023 unknown 17 10409 71480000 D24AF00024 03/31/2023 04/30/2023 unknown 18 10412 70080300 D23AF00027 03/31/2023 04/30/2023 unknown 19 10412 70140100 D22AF00007-00 03/31/2023 04/30/2023 unknown Item # Fund # SPG Code Award # Quarter End Due Date Date Submitted 20 10412 70140200 D22AF00007-00 03/31/2023 04/30/2023 unknown b) For 3 (or 7%), SF-425 reports do not align with the underlying FMIS expenditure report: Item # Fund # SPG Code Award # Quarter End SF-425 Amount 240P Amount Difference 1 410100 all cost centers D22AF00003-00 FY22 annual $713,140 $819,340 ($ 106,200) 2 10409 70290100 D22AF00006-00 06/30/2023 5,743,454 6,063,193 (319,739) 3 20103 70060101 D23AF00041-00 7/30/2023 20,137,770 20,328,571 (190,801) ($ 616,740) Condition 3 (ALN 15.875) For the Four Atolls Health Care program, we were unable to ascertain compliance with reporting requirements due to lack of grant agreement as reported in Finding No. 2023-015. Further, a second grant agreement (D23AP00058-01) covering the period from 02/02/2023 through 09/30/2027 was available for examination, however, the grant terms and conditions attachment was not included. Condition 4 (ALN 93.323): RepMar uses the ELC Cooperative Agreement Management Platform (CAMP) portal to report financial progress to the Federal grantor. RepMar was unable to provide evidence that such reporting occurred during the audit period. Furthermore, no evidence was provided indicating that the financial information reported thereon agreed to RepMar's underlying accounting records. Cause: RepMar lacks adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar lacks adequate internal control policies and procedures over retention of all grant agreements, copies of reports submitted to grantors, and the underlying accounting records. Effect: Sufficient appropriate audit evidence supporting compliance with applicable reporting requirements were not obtained which results in report modification. No questioned cost is reported as the condition relates to inadequacy of internal control policies and procedures governing monitoring, preparation, independent review and retention of required reports and underlying accounting records. Identification as a Repeat Finding: Finding Nos. 2022-009. Recommendation: RepMar should establish adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar should establish internal control policies and procedures requiring retention of all grant agreements and copies of reports submitted to grantors. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Federal Agency: U.S. Department of Health and Human Services Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Pass Through Agency: N/A Pass Through Entity Identifying Number: N/A Award Period: October 1, 2022 – September 30, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Condition/Context: Although the Organization had processes and procedures in place to properly charge award programs for employee time and effort worked, these processes and procedures were not formally documented. The Organization initially charged employee costs to award programs based on budget. The monthly reimbursement claims were adjusted to actual costs based on management’s review of actual time and effort. However, the actual time and effort documentation was either not retained or not formally documented for all employees testing. Criteria: In accordance with the Compliance Supplement, Part 6 – Internal Control, 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In accordance with 2 CFR Part 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: (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; (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 (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and (vii) 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; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Cause: The Organization did not have documented internal controls designed to ensure employee payroll allocations charged to the grant reflected actual time and effort. Effect: The Organization was not in compliance with the Compliance Supplement related to establishing and maintaining internal controls over federal awards. Repeat Finding: No Questioned Costs: None Recommendation: We recommend that management implement a requirement for employees to complete level of effort forms attesting to actual time spent working on the federal program on a regular basis, but no less than annually, during the fiscal period. These forms should be reviewed by a supervisor knowledgeable of the employee's activities and grant requirements and retained thereafter.
Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Pass Through Agency: Mercy Care Pass Through Entity Identifying Number: 1505-0271 Award Period: October 1, 2022 – September 30, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Condition/Context: Although the Organization had processes and procedures in place to properly charge award programs for employee time and effort worked, these processes and procedures were not formally documented. The Organization initially charged employee costs to award programs based on budget. The monthly reimbursement claims were adjusted to actual costs based on management’s review of actual time and effort. However, the actual time and effort documentation was either not retained or not formally documented for all employees testing. Criteria: In accordance with the Compliance Supplement, Part 6 – Internal Control, 2 CFR Section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In accordance with 2 CFR Part 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: (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; (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 (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and (vii) 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; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Cause: The Organization did not have documented internal controls designed to ensure employee payroll allocations charged to the grant reflected actual time and effort. Effect: The Organization was not in compliance with the Compliance Supplement related to establishing and maintaining internal controls over federal awards. Repeat Finding: No Questioned Costs: None Recommendation: We recommend that management implement a requirement for employees to complete level of effort forms attesting to actual time spent working on the federal program on a regular basis, but no less than annually, during the fiscal period. These forms should be reviewed by a supervisor knowledgeable of the employee's activities and grant requirements and retained thereafter.
U.S. Department of the Treasury COVID-19 Coronavirus State and Local Fiscal Recovery Funds, Award Years: 2021, 2022 Criteria or Specific Requirement - Suspension and Debarment In accordance with 2 CFR 200.214, non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. In accordance with 2 CFR Section 180.300, when a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred. Per 2 CFR 200.303, the non-Federal entities receiving federal awards (i.e., auditee management) should establish and maintain internal control design to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: During our test work over suspension and debarment compliance requirements, we determined checks were not completed prior to entering into contracts for two out of two vendors selected for testing. Cause: The City's controls to ensure suspension and debarment checks on vendors receiving federal funds did not operate effectively. Effect or Potential Effect: Federal funds could be paid to entities that are suspended or debarred. Questioned Costs: None. Context: Two contracts for the years ended December 31, 2023, totaling approximately $320,000 and $220,000, respectively, were selected for testing suspension and debarment, and in both instances (2 of 2), the City did not check the vendor’s suspension and debarment status prior to purchase. The sample was not intended to be, and was not, a statistically valid sample. Identification of Prior Year Finding: N/A Recommendation: Policies and procedures should be modified to ensure that suspension and debarment checks are performed on vendors prior to making purchases with federal funds. Views of Responsible Official and Planned Corrective Action: Management is in agreement with the finding. The City will incorporate controls surrounding suspension and debarment to ensure the appropriate checks are performed prior to entering into covered transactions.
Finding No.: 2023-005 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Activities Allowed or Unallowed Area: Allowable Costs/Cost Principles Questioned Costs: $61,291 Criteria: In accordance with the applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant program legislation, federal awarding agency regulations, and the terms and conditions of the award and consistent with the purpose of the grant. 2 CFR 200.403(a) states that federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and 2 CFR 200.403(g) states that costs should be adequately documented. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Conditions: 1. For one (or 9%) of eleven items, aggregating $74,721 of $359,456 in total non-payroll expenditures, no supporting documentation was provided to substantiate how the allocated amount charged to the program was determined and how the expenditure (PO# 23-PO- 1856 ; $35,492) directly relates to the purpose of the underlying subgrant. 2. For thirty-one (or 63%) of forty-nine items, aggregating $64,266 of $1,612,427 in total payroll expenditures, we noted the following: Item #s 1 through 6 relate to employee’s salaries and wages and related fringe benefits (employer contributions for social security and health insurance) allocated and charged to federal grant for which we noted either a) the hours paid is higher compared to the hours recorded on the approved timesheet or b) the rate paid is higher compared to the rate per contract. Item #s 7 through 14 relate to salaries – overload or adjunct that were not supported by adequate documentation (i.e. semester section offering or instructor’s schedule) to ascertain whether service was received. For item #15, we noted that the rate paid is higher compared to the rate per contract. Furthermore, the related salaries – overload was not supported by adequate documentation (i.e. semester section offering/instructor’s schedule) to ascertain whether service was received. For item #s 16 through 31, there were no approved timesheet on file to substantiate the actual number of hours worked. Further, for item #s 29 through 31, approval of the amount paid to employees relating to leave was not on file. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions and ensuring expenditures are necessary and reasonable for the performance of the Federal award. Effect: The College is in noncompliance with activities allowed or unallowed and allowable costs/cost principles requirements. The reportable questioned cost is $61,291 based on the items identified in Conditions above. For condition #2, item #s 4 through 6, 13 through 14, and 20 through 31, questioned costs related to federal expenditures that may result from discrepancies noted or unestablished allocation are not determinable. Identification as a Repeat Finding: 2022-008 and 2022-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-006 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Equipment and Real Property Management Questioned Costs: Undeterminable Criteria: Non-federal entities other than states must follow Sections 200.313(c) through (e) of the Uniform Guidance. Section 200.313(d) states that procedures for managing equipment, whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: a. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be carried out and the results reconciled with the property records at least once every two years; c. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated; d. Adequate maintenance procedures must be developed to keep the property in good condition; and e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following: 1. No capital assets record was provided. 2. An inventory of capital assets has been performed on an annual basis; however, the result of the physical inventory was not completely reflected/reconciled with the property records. 3. As capital assets records are not effectively maintained, it does not appear that the College has effectively developed means to adequately safeguard capital assets from loss, damage, or theft, or to reasonably investigate such occurrences. 4. Long-lived assets are not routinely evaluated for possible impairment. We are unable to assess the overall cumulative monetary value of the noncompliance. However, the table below summarizes total capital outlays over the past five years: Cause: The College lacks adequate internal control policies and procedures over compliance with applicable federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts are not effectively implemented. Effect: The College is in noncompliance with applicable equipment and real property management requirements. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: 2022-010 Recommendation: College management should establish and strengthen internal control policies and procedures over compliance with applicable federal regulations on equipment and real property management. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-007 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Period of Performance Questioned Costs: $9,883 Criteria: The terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Conditions: 1. For one (or 4%) of twenty-three items, aggregating $45,931 of $75,337 in total non-payroll expenditures, the item amounting to $1,209 (Check # 1039088; PO# 22-PO-2614) was incurred prior to the funding period stipulated in the grant awards. 2. For twenty (or 54%) of thirty-seven items, aggregating $20,993 of $121,401 in total payroll expenditures, the following costs of salaries charged to the program were incurred prior to the funding period stipulated in the grant awards: Cause: The College lacks adequate internal controls over compliance with applicable federal regulations relating to period of performance. Effect: The College is in noncompliance with applicable period of performance requirements. The reportable questioned cost is $9,883 based on the items identified in Conditions above. For item #s 10 through 20, only $2,246 is included in the total questioned costs, which relates to costs incurred prior to the funding period stipulated in the grant awards. Identification as a Repeat Finding: 2022-011 Recommendation: College management should improve internal control policies and strengthen controls to comply with applicable period of performance requirements. Specifically, review should be made to ensure all costs charged to the program are within the funding period stipulated in the grant awards. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-008 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Procurement and Suspension and Debarment Questioned Costs: $66,667 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. 2 CFR 200.320(a) states that for micro-purchases, to the extent practicable, the recipient or subrecipient should distribute micro-purchases equitably among qualified suppliers. 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: For six (or 50%) of twelve items, aggregating $157,536 in total non-payroll expenditures, supporting procurement documentation was not sufficient to substantiate compliance with the procurement method, as follows: For item #s 1 through 3, there were no vendor quotations on file. For item #s 4 and 6, procurement was sole sourced with written justification but does not appear to be justified. For item # 5, there were no adequate vendor quotations on file. Additionally, the College has no formal policies and procedures over compliance with the requirement of 2 CFR 200.320 which requires that the College distribute micro-purchases equitably among qualified suppliers. Moreover, the College has no internal control policies and procedures over verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Furthermore, the College lacks internal control policies and procedures over: 1) distribution of micro-purchases equitably among qualified suppliers; and 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Effect: The College is in noncompliance with applicable procurement requirements. The reportable questioned cost is $66,667 based on the items identified in Condition above. Identification as a Repeat Finding: 2022-012 Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Furthermore, the College should establish internal control policies and procedures over: 1) distribution of micro-purchases equitably among qualified suppliers; and 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-009 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Area: Allowable Costs/Cost Principles Questioned Costs: $745,189 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll) and to make additional financial grants to students. HEERF I and HEERF II funds may also have been used to carry out student support activities authorized by the Higher Education Act (HEA) that address needs related to coronavirus. HEERF Frequently Asked Questions (FAQ) Rollup Document dated October 14, 2020 states that: • Question #38: Institutions can use CARES Act funds under Section 18004(a)(2) to make scholarships to students. Section 18004(a)(2) of the CARES Act state that institutions may use funds specifically “for grants to students for any component of the student’s cost of attendance (as defined under section 472 of the HEA), including food, housing, course materials, technology, health care, and child care”. • Question #47: Institution may use funds from the Institutional Portion of its section 18004(a)(1) allocation to purchase equipment or software, pay for online licensing fees, or pay for internet service to enable students to transition to distance learning as such costs are associated with a significant change in the delivery of instruction due to the coronavirus. An institution may also use Institutional Portion funds for any other costs for computer system upgrades that are reasonably related to “significant changes to the delivery of instruction due to the coronavirus.” This would not include, for example, previously planned upgrades to computer systems. 2 CFR 200.403(a) states that federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and 2 CFR 200.403(g) states that costs should be adequately documented. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: For four items (or 33%) of twelve items, aggregating $1,085,985 of $1,184,585 in total non-payroll expenditures, we noted the following: Item #s 1 and 2 were not supported by adequate documentation (i.e. justification of the purpose prior to purchase and receiving reports) to ascertain whether such expenditure is associated to distance learning due to coronavirus. There is no evidence of communication or consultation with the grantor agency that this expenditure is allowable. Item # 3 pertains to relinquishment of student’s outstanding debt with the College, whereas the College directly credited student’s accounts and got reimbursement from the CARES Act funds under Section 18004(a)(2). These are not associated with coronavirus. There is no evidence of communication or consultation with the grantor agency that these expenditures are allowable. Item # 4 is standard recurring cost and not associated with coronavirus. Specifically, expenditure relates to annual software subscription of the College. There is no evidence of communication or consultation with the grantor agency that this expenditure is allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions and ensuring expenditures are necessary and reasonable for the performance of the Federal award. Effect: The College is in noncompliance with activities allowed or unallowed and allowable costs/cost principles requirements. The reportable questioned cost is $745,189 based on the items identified in Condition above. Identification as a Repeat Finding: 2022-019 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-010 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Cash Management Questioned Costs: Undeterminable Criteria: 2 CFR section 200.302(b)(6) states that the recipient must establish written procedures to implement the requirements of 2 CFR section 200.305. Specifically, 2 CFR section 200.305(b) states that for recipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency and the disbursement of funds by the recipient. Furthermore, per OMB Compliance Supplement May 2023, Student Aid (ALN 84.425E) should be disbursed within 15 calendar days of the drawdown from ED’s grant management system (G5), while Institutional Aid Portion, (a)(2), and (a)(3) funds (all other ALNs) should be disbursed within 3 calendar days of the drawdown from G5. 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: The College does not have written procedures to implement the requirements set in the criteria above. Furthermore, monitoring of actual disbursements of the following drawdowns during the year was not performed: Cause: The College lacks written policies and procedures over cash management, including monitoring of actual disbursements of drawdowns. Effect: The College is in noncompliance with applicable cash management requirements. Questioned costs, if any, that may result from non-monitoring of actual disbursements are not determinable. Identification as a Repeat Finding: 2022-021 Recommendation: College management should establish written policies and procedures over cash management, including monitoring of actual disbursements of drawdowns. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-011 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 Area: Procurement and Suspension and Debarment Questioned Costs: $179,015 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. 2 CFR 200.319 states that: (a) All procurement transactions under the Federal award must be conducted in a manner that provides full and open competition and is consistent with the standards of this section and § 200.320. (c) (6) Examples of situations that may restrict competition include specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement. (d) (2) The recipient or subrecipient must have written procedures for procurement transactions. These procedures must ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the property, equipment, or service being procured. The description may include a statement of the qualitative nature of the property, equipment, or service to be procured. When necessary, the description must provide minimum essential characteristics and standards to which the property, equipment, or service must conform. Detailed product specifications should be avoided if at all possible. When it is impractical or uneconomical to clearly and accurately describe the technical requirements, a “brand name or equivalent” description of features may be used to provide procurement requirements. The specific features of the named brand must be clearly stated. 2 CFR 200.320(a) states that for micro-purchases, to the extent practicable, the recipient or subrecipient should distribute micro-purchases equitably among qualified suppliers. 2 CFR 200.320(c) states that there are specific circumstances in which the recipient or subrecipient may use a noncompetitive procurement method. The noncompetitive procurement method may only be used if one of the following circumstances applies: (1) The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); (2) The procurement transaction can only be fulfilled by a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation; (4) The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or (5) After soliciting several sources, competition is determined inadequate. 2 CFR 200.324(a) states that the recipient or subrecipient must perform a cost or price analysis for every procurement transaction, including contract modifications, in excess of the simplified acquisition threshold. The method and degree of analysis conducted depend on the facts surrounding the particular procurement transaction. For example, the recipient or subrecipient should consider potential workforce impacts in their analysis if the procurement transaction will displace public sector employees. However, as a starting point, the recipient or subrecipient must make independent estimates before receiving bids or proposals. 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: Of four items (or 100%), aggregating $179,015 in total non-payroll expenditures, supporting procurement documentation was not sufficient to substantiate compliance with the procurement method, as follows: For item #s 1 through 3, there were no vendor quotations on file. Further for item #s 2 and 3, there was no documentation on file to support compliance with 2 CFR 200.324(a). For item #4, procurement did not provide full and open competition in the solicitation process. The solicitation specified particular models, including a requirement for a specific “brand name” product instead of allowing “an equal” product to be offered. Furthermore, for solicitation with brand name indicated, solicitation did not include “brand name or equivalent” description. In addition, the selected vendor was not among the vendors who provided quotations. Additionally, the College has no formal policies and procedures over compliance with the requirement of 2 CFR 200.320 which requires that the College distribute micro-purchases equitably among qualified suppliers. Moreover, the College has no internal control policies and procedures over verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Furthermore, the College lacks internal control policies and procedures over: 1) distribution of micro-purchases equitably among qualified suppliers; 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded; and 3) performance of a cost or price analysis for every procurement transaction in excess of the simplified acquisition threshold. Effect: The College is in noncompliance with applicable procurement requirements. The reportable questioned cost is $179,015 based on the items identified in Condition above. Identification as a Repeat Finding: 2022-022 Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Furthermore, the College should establish internal control policies and procedures over: 1) distribution of micro-purchases equitably among qualified suppliers; 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded; and 3) performance of a cost or price analysis for every procurement transaction in excess of the simplified acquisition threshold. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-012 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425E Higher Education Emergency Relief Fund (HEERF) - Student Aid Portion Federal Award No.: COVID-19 P425E204126 AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Reporting Questioned Costs: $0 Criteria: The CARES Act 18004(e) and the CRRSAA 314(e) requires an institution receiving funds under HEERF I and HEERF II to submit a report to the secretary, at such time in such a manner as the secretary may require. In accordance with applicable reporting requirements, the College is required to submit HEERF I, II, & III Annual Performance Report Form (PRA Number 1840-0850) with the following key line items: Question 5: Institutions were required to prioritize exceptional need in awarding emergency financial aid grants to students. Documentation must show methodology for distributing aid that prioritizes exceptional need. Question 9b, row 13: “Implementing evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines” and row 14: “Conducting direct outreach to financial aid applicants.” Spending under these categories indicates whether an institution has spent funds under a required use of funds established under the ARP. If an institution indicates zero-dollar amount spending for either or both categories, examine earlier annual reports to determine the institution had spending at some point on these two funding categories consistent with American Rescue Plan Act (ARP) FAQ Question 21. Additionally, the College is required to submit Quarterly Budget and Expenditure Reporting for all HEERF I, II, and III grant funds (PRA Number 1840-0849). The quarterly portion reporting requirements involve publicly posting completed forms conspicuously on the institution’s website. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Conditions: 1. Total annual expenditures per the Annual Report Data Collection System differ from cumulative expenditures from 01/01/22 through 12/31/22 per underlying accounting records, as follows: 2. ALN 84.425F COVID-19 HEERF-Institutional Portion ALN 84.425L COVID-19 HEERF-Minority Serving Institution Quarterly Budget and Expenditure reports were publicly posted beyond the 10-day posting requirement after the end of each calendar quarter as follows: Cause: The College lacks adequate internal controls over the timely and accurate preparation and review of required reports as stipulated in the criteria above. Effect: The College is in noncompliance with applicable reporting requirements. No questioned costs are presented as the finding relates to the reporting compliance requirement. Identification as a Repeat Finding: 2022-023 Recommendation: College management should strengthen controls so that required reports are timely and accurately prepared and reviewed and submitted within the specified timeframes to evidence compliance with applicable reporting requirements. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Finding No.: 2023-013 Federal Agency: U.S. Department of Education AL Program: 84.063 Federal Pell Grant Program Federal Award No.: P063P214572, P063P224572, P063P234572 Area: Cash Management Questioned Costs: Undeterminable Criteria: The College’s Program Participation Agreement indicates that the College is placed on the Heightened Cash Monitoring (HCM) payment method. Based on U.S. Department of Education (ED)’s publication, the College is placed on HCM1 payment method for the quarters ended March 1, 2023, June 1, 2023, and September 1, 2023. Under the HCM payment method, an institution must credit a student’s account for the amount of Title IV funds the student is eligible to receive and pay the amount of any credit balance due before the institution submits a request for funds or seeks reimbursement. Under HCM1, after making a disbursement to eligible students from institutional funds and submitting disbursement records to the Common Origination and Disbursement (COD) system, the institution draws down funds to cover those disbursements through G5 the same way as an institution on the Advance Payment Method. Due to the effects of the COVID-19 pandemic, in a December 2020 Federal Register Notice, ED permitted institutions on the HCM1 payment method to submit a request for funds without first paying credit balances due, as long as the institution pays the credit balances no later than three calendar days after receiving the funds for those students. 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: The College does not have written procedures to implement the requirements set in the criteria above. Furthermore, no detailed listing of expenditures supporting the following drawdowns during the year was on file to ascertain whether the expenditures were paid prior to the date of request for fund: Cause: The College lacks written policies and procedures over cash management, including monitoring of actual disbursements of drawdowns. Effect: The College is in noncompliance with applicable cash management requirements. Questioned costs, if any, that may result from non-monitoring of actual disbursements are not determinable. Recommendation: College management should establish written policies and procedures over cash management, including monitoring of actual disbursements of drawdowns. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.
Item 2023-007 Activities Allowed/Allowable Costs/Costs Principles Education Stabilization Fund ALN# 84.425D and 84.425U US Department of Education Passed through Alabama State Department of Education Federal Grant/Contract Number: 2021-802-004295; 2021-802-004296; 2021-802-004298; X230168 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the recipient or subrecipient. Condition – A detail of $423,029 of costs associated with payroll expenditures could not be obtained and therefore not tested. We were unable to obtain sufficient, appropriate audit evidence related to these amounts. Cause – Employee fund allocations and payroll documentation were not retained by the Academy to substantiate activities allowed and allowable costs. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – $423,029 of payroll expenditures were unable to be tested as a population of expenditures related to payroll could not be obtained. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Item 2023-008 Activities Allowed/Allowable Costs/Costs Principles Education Stabilization Fund ALN# 84.425D and 84.425U US Department of Education Passed through Alabama State Department of Education Federal Grant/Contract Number: 2021-802-004295; 2021-802-004296; 2021-802-004298; X230168 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing theFederal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition – During testing of program disbursements there were 2 instances where the purchase order or request used to identify approval of the disbursement could not be located and 1 invoice that could not be located out of 7 program disbursements sampled. Deficiencies occurred in approximately 42.85% of the population sampled. Cause – Supporting documentation relevant to see that proper approval for controls had been performed could not be obtained. Supporting invoices were not retained by the Academy to substantiate activities allowed and allowable costs. Effect – Inadequate or inconsistent documentation and review of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – Total of expenses sampled in which documentation could not be provided was $5,041 that amount extrapolated to the population was $26,072. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Item 2023-009 Activities Allowed/Allowable Costs/Costs Principles Child Nutrition Program ALN# 10.555 and 10.553 US Department of Agriculture Passed through Alabama State Department of Education Federal Grant/Contract Number: 802 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the recipient or subrecipient. Condition – During testing of program disbursements there was 2 instances where the purchase order or request used to identify approval of the disbursement could not be located, which was approximately 28.5% of the population sampled. In our payroll testing, we noted multiple instances where an approved pay rate and hours covering the appropriate time period could not be obtained. Cause – Supporting documentation relevant to see that proper approval for controls had been performed could not be obtained. Effect – Inadequate or inconsistent review of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – Total of expenses sampled in which documentation could not be provided was $9,926 that amount extrapolated to the population was $17,759. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Finding Number: 2023-011 Prior Year Finding Number: 2022-003 Program: Emergency Rental Assistance (ERA) ALN: 21.023 Compliance Requirement: Eligibility Criteria --- Pursuant to 2 CFR §200.303, non-Federal entities are required to establish and maintain effective internal control over Federal awards to provide reasonable assurance of compliance with applicable laws, regulations, and award terms. In addition, the Emergency Rental Assistance (ERA) program, as established under the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021, requires that funds be provided only to eligible households meeting specified criteria. The 2023 Compliance Supplement further requires grantees to obtain and retain documentation supporting residency, lease agreements, and rental obligations. Condition --- We sampled and selected 60 of 505 emergency rental assistance payment and noted for 57 samples multiple exceptions, including: • Missing or unsigned lease agreements • Lack of landlord ownership verification • Unsupported costs • Missing identification documentation • Incomplete or unapproved payment request forms • Incomplete or improperly notarized application documentation No exceptions were noted in the remaining three transactions tested. Questioned Costs --- $68,934.72 Context --- The condition was identified through testing performed using a statistically valid sample of program transactions. Effect --- Failure to maintain adequate supporting documentation increases the risk that ineligible beneficiaries may receive assistance, resulting in noncompliance with Federal program requirements. Cause --- Management did not consistently adhere to established policies and procedures requiring the retention of complete documentation supporting eligibility determinations. Recommendation --- We recommend that management strengthen internal controls to ensure that all required documentation is obtained, reviewed, and retained prior to approval of assistance. Views of Responsible Officials Management acknowledges the findings and appreciates the opportunity to provide clarification and context regarding the noted exceptions. First, with respect to landlord ownership verification, it should be noted that proof of property ownership was only required for private landlords in accordance with program policies and procedures. As such, this requirement was not applicable to all transactions reviewed. The documentation samples provided for audit testing were sourced from ERAP program files accessible to program staff. While some payment request forms within these files may appear incomplete or unsigned, the official, fully approved versions are maintained by Accounting. In certain cases, ERAP did not receive copies of the executed forms for inclusion in its files. Accordingly, although the sampled documents may not reflect final approval, the fully approved payment request forms are on file with Accounting and can be provided to support the transactions. Management also notes that staffing and process limitations during the earlier phases of program implementation contributed to documentation inconsistencies. The Grant Administrator position, which plays a critical role in oversight and compliance, was filled in February 2023. Since that time, significant improvements have been made to internal controls and operational procedures, including: o Strengthening document collection and verification processes o Improving timeliness in application review and approval to reduce bottlenecks o Enhancing case file completeness and organization o Transitioning from primarily paper-based records to electronic file management systems These procedural enhancements were formally documented in the ERAP Review Process to ensure consistency, accountability, and ongoing compliance with federal requirements. Additionally, administrative expenses exceeding the 15% threshold were reviewed and approved by Treasury, as the overage was directly attributable to the recapturing of $16 million by Treasury prior to the ERA1 closeout. Furthermore, Housing Stability Services’ expenditure remained within the 10% threshold for ERA2. Management remains committed to continuous improvement and has taken corrective actions to strengthen internal controls, ensure proper documentation retention, and maintain full compliance with applicable federal regulations.
Finding Number: 2023-012 Prior Year Finding Number: 2022-004 Program: Emergency Rental Assistance (ERA) ALN: 21.023 Compliance Requirement: Reporting Criteria --- In accordance with 2 CFR §200.303, entities must establish and maintain internal controls to ensure compliance with Federal requirements. ERA reporting guidance requires timely submission of accurate and complete reports, adherence to administrative cost limitations, and proper classification of expenditures. Condition --- Testing of two quarterly ERA2 reports and the ERA1 final close-out report identified the following: • Lack of evidence of review by the Chief Financial Officer prior to submission • Reports submitted after the required deadline • Incomplete demographic data • Exceedance of administrative and housing stability cost thresholds • Insufficient supporting documentation for reported amounts Questioned Costs --- Not determinable Context --- The condition was identified through testing of selected quarterly and final reports. Effect --- Inadequate controls over reporting increase the risk of inaccurate or unsupported financial and performance data being submitted to the Federal awarding agency. Cause --- Management did not establish or maintain effective controls over the preparation, review, and approval of reports. Recommendation --- We recommend that management enhance internal controls over reporting, including formal review procedures, timely submission processes, and retention of supporting documentation. Views of Responsible Officials: Management acknowledges the findings and provides the following context regarding the delay in submission of the FY 2023 reporting package. During FY 2023, the Internal Control Memoranda used to guide and review program operations that contained information that changed during the fiscal year due to the restructuring of the ARP Division and the implementation of the Grant Administrator role. These organizational changes affected reporting lines and oversight responsibilities, but the Internal Control Memoranda were not updated in real time to fully reflect them. To help ensure timely submission of the quarterly compliance reports, the reporting process was updated to remove the multi-level review requirement. The reports are highly detailed and require significant compilation and reconciliation within a limited timeframe between the close of the reporting period and the submission deadline. Eliminating the multi-level review process allowed management to meet reporting deadlines more efficiently. Additionally, administrative expenses exceeding the 15% threshold were reviewed and approved by Treasury, as the overage was directly attributable to the recapturing of $16 million by Treasury prior to the ERA1 closeout. Furthermore, Housing Stability Services expenditure remained within the 10% threshold for ERA2. It is also important to note that the report is cumulative in nature, which allows for corrections or updates to be incorporated in subsequent quarterly submissions, thereby maintaining overall reporting accuracy over time. Additionally, copies of all submitted reports are provided to both the CFO and the Executive Director (ED) for review and oversight. Further strengthening financial oversight, the CFO requires all direct reports to submit monthly to bi-monthly financial reports. These reports are used to continuously monitor program performance, identify any discrepancies, and address issues in a timely manner. Management remains committed to strengthening internal controls and ensuring the timely and accurate submission of all required federal reporting.
Finding No. 2023-003 Federal Agency: U.S. Department of Agriculture AL Program: 10.555 National School Lunch Program (NSLP) Federal Award No.: 217NMNM3N1174, 227NMNM3N1174 and 237NMNM3N1174 Area: Allowable Costs/Cost Principles Questioned Costs: $-0- Criteria: In accordance with 2 CFR Section 200.303, non-federal entities receiving federal awards must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Based on walkthrough procedures performed over the disbursement process of program funds, PSS lacks documented evidence of review and approval controls over check and ACH payments to ensure that payment amounts agree with approved invoice amounts. Specifically, the process did not include documented review or approval demonstrating that checks and ACH disbursements were verified against supporting invoices prior to payment. As a result, controls designed to ensure the accuracy and validity of disbursements are not adequately documented or evidenced. Cause: PSS lacks adequate documentation evidencing its monitoring and review procedures over disbursements of program funds, including review and approval controls to ensure that checks and ACH payments agree with approved invoice amounts. Effect or potential effect: PSS is in noncompliance with 2 CFR Section 200.303 related to internal control requirements. No questioned costs are identified as testing did not disclose noncompliance with allowable costs/cost principles compliance requirements. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should implement and enforce adequate documentations over its monitoring control procedures in place over disbursements of program funds. Views of Auditee and Corrective Action Plan: PSS concurs with the findings. Refer to PSS’ Corrective Action Plan for additional information.