Finding No. 2023-010 Federal Agency: U.S. Department of Education AL Program: 84.403 Consolidated Grants to the Outlying Areas Federal Award No.: S403A210001, S403A220001, S403A230001 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 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 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 Repeat Finding: Finding No. 2022-004 Recommendation: PSS should implement, document and consistently enforce appropriate review and approval controls over disbursements of program funds Views of Auditee and Corrective Action Plan: PSS concurs with the finding. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-013 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A200001, S425A210001, S425X210001 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 Repeat Finding: Finding No. 2022-005 Recommendation: PSS should implement compensating, redundant, or adjacent control activities, including documented supervisory reviews and approval checklists, to ensure compliance with federal requirements. Views of Auditee and Corrective Action Plan: PSS concurs with the finding. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-015 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A210001 and S425X210001 Area: Matching, Level of Effort, Earmarking Questioned Costs: Undeterminable 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. In accordance with the terms and conditions in the Grant Agreement, the State Educational Agencies (SEA) will use (a) not less than twenty percent of its ARP-OA SEA allocation to carry out, directly or through subgrants or contracts, activities to address the academic impact of lost instructional time by supporting the implementation of evidence-based interventions; (b) a portion of their ARP-OA SEA allocation to carry out, directly or through subgrants to Local Educational Agencies (LEAs) or through contracts, the implementation of evidence-based summer enrichment programs; (c) and a portion of their ARP-OA SEA allocation to carry out, directly or through subgrants to LEAs or through contracts, the implementation of evidence-based comprehensive afterschool programs. Condition: PSS did not maintain or provide adequate supporting documentation to demonstrate compliance with the ARP-OA earmarking requirements. Specifically, PSS did not provide budgetary documentation evidencing that the required portions of ARP-OA funds were allocated and expended for allowable evidence-based interventions, summer enrichment programs and comprehensive afterschool programs. Questioned costs are undetermined as we are unable to quantify the extent of noncompliance. Cause: PSS does not have an effective internal control over financial documentation related to earmarked ARP-OA funds. PSS lacks established procedures to ensure that budget allocations and supporting record related to earmarking requirements are properly prepared, retained and readily available for audit and compliance reporting purposes. Effect or potential effect: PSS is in noncompliance with the earmarking requirements for the ARP-OA program. Questioned costs are undeterminable as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should strengthen internal controls over ARP‑OA earmarking compliance by establishing and implementing formal procedures to ensure that: 1. Required earmarking allocations are clearly identified in budgets; and 2. Supporting documentation is retained, organized, and readily available for audit and compliance review purposes. Views of Auditee and Corrective Action Plan: PSS does not agree with the finding. PSS has allocated and expended more than 20% on evidence-based interventions to address learning loss. Specifically, projects listed under the ARP expense report are mapped directly to learning loss categories (e.g. expenses for summer school, extended learning opportunities, high dosage tutors, etc.). Refer to PSS’ Corrective Action Plan for additional information. Auditor Response: The supporting documentation provided, including the ARPA-OA budget that was resubmitted, did not clearly identify the required earmarking allocations and related expenditures for evidence-based interventions, summer enrichment programs and comprehensive afterschool programs. Recalculation or verification of compliance with the earmarking requirements of the ARP-OA program could not be performed. The finding remains.
Finding No. 2023-016 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A210001 and S425X210001 Area: Special Tests and Provisions - Wage Rate Requirement Questioned Costs: Undeterminable 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. Under 29 CFR 5.5(a), contracts exceeding $2,000 for construction, alteration, or repair of public buildings or public works financed in whole or in part with federal funds must include the required Davis-Bacon labor standards clauses, including the incorporation by reference of all applicable rulings and interpretations (29 CFR parts 1, 3, and 5). Additionally, pursuant to 29 CFR 5.5(a)(3)(ii)(A), contractors or subcontractors must submit weekly, for each week in which any Davis Bacon Act (DBA)- or Related Acts-covered work is performed, certified payrolls to the appropriate Federal agency, if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the certified payrolls to the applicant, sponsor, owner, or other entity, as the case may be, that maintains such records, for transmission to the agency. Condition: 1. For eight (or 100%) of eight construction contracts selected for testing, the required clauses, as identified in 29 CFR 5.5(a)(1) and 29 CFR 5.5(a)(8), were not inserted or referenced in the contract or purchase order. No questioned costs are presented as we are unable to quantify the extend of the noncompliance. 2. For eight (or 100%) of eight construction expenditures selected for testing, PSS did not provide the certified payrolls from contractors or subcontractors for work subject to Davis-Bacon Act requirements. No questioned costs are presented as we are unable to quantify the noncompliance. Cause: PSS did not establish and effectively implement internal control procedures to address or prevent noncompliance of the applicable wage rate requirements. Effect or potential effect: PSS is in noncompliance with applicable wage rate requirements. Questioned costs are undetermined as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should establish and implement effective internal controls to ensure compliance with federal wage rate requirements. At a minimum, PSS should: 1. Ensure all applicable contracts and purchase orders include or reference the required Davis‑Bacon labor standards clauses; 2. Require contractors and subcontractors to submit certified payrolls for all Davis‑Bacon–covered work; and 3. Implement procedures to review, approve, and retain certified payrolls and supporting documentation. Views of Auditee and Corrective Action Plan: PSS concurs with the findings. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-017 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A210001 and S425X210001 Area: Special Tests and Provisions - Private School Participation Questioned Costs: Undeterminable 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. In accordance with 34 CFR 299.7(a)(1), in order to have a timely and meaningful consultation, an agency, consortium, or entity must: (i) Consult with appropriate private school officials during the design and development of the agency, consortium, or entity's program for eligible private school children and their teachers and other educational personnel; and (ii) Consult before the agency, consortium, or entity makes any decision that affects the opportunities of eligible private school children and their teachers and other educational personnel to participate in the applicable program. Additionally, in accordance with 34 CFR 299.7(2), such consultation must continue throughout the implementation and assessment of equitable services. Lastly, based on 34 CFR 299.9 (a)(1), expenditures of funds made by an agency, consortium, or entity under a program listed in 34 CFR 299.6 (b) for services for eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the amount of funds expended for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of those children and their teachers and other educational personnel. Condition: 1. PSS did not provide adequate documentation to verify that there were timely and meaningful consultations with appropriate private school officials during the design and development of federally funded programs and prior to making decisions involving private school participation regarding the size and scope of the equitable services that will be provided to eligible private school children and their teachers, and other educational personnel, the amount of funds available for those services, and how that amount is determined. 2. The amount allocated to eligible private schools is not equal to the amount of funds expended for participating public schools in FY2023 on a per-pupil basis. Since no adequate documentation was provided for the calculation of the amount of funds for eligible private schools as cited at Condition 1, no questioned costs are presented as we are unable to quantify the extent of the noncompliance. Cause: 1. PSS does not perform timely consultations and follow-ups with the eligible private school officials in accordance with provisions of 34 CFR 299.7. 2. PSS does not have controls established to properly monitor the need for consultations, follow-up or corrective actions to ensure that the plans established are being met. 3. PSS does not have procedures in place to properly calculate and monitor that the per pupil amount for both private and public schools are equal. Effect or potential effect: PSS is in noncompliance with the applicable special test and provision requirements of the participation of private school children. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: 1. PSS should adhere to the provisions of 34 CFR 299.7 and ensure that timely consultations with the eligible private schools are conducted. Additionally, PSS should establish controls and procedures to ensure that the results of the consultations are properly monitored and implemented. 2. PSS should establish monitoring procedures to ensure that costs budgeted or allocated to private and public schools will remain equal on a per pupil basis. Views of Auditee and Corrective Action Plan: PSS does not agree with the finding. PSS asserts that timely and meaningful consultations were conducted with private school officials prior to making decisions regarding the size, scope, and funding of equitable services for FY2023. Calculations for the equitable share under the Education Stabilization Funds were performed in accordance with federal regulations, ensuring that per-pupil allocations for eligible private school students and teachers were equitable relative to public school expenditures. PSS maintains that consultation timelines, meeting records, and allocation formulas were maintained. While PSS is continuously refining its administrative workflows, the existing documentation and controls were sufficient to satisfy the requirements of 34 CFR § 299.7. Refer to PSS’ Corrective Action Plan for additional information. Auditor Response: The supporting documentation provided, including the minutes of meetings with private schools, did not demonstrate the required timely and meaningful consultation with appropriate private school personnel during the design and development of federally funded programs and prior to making decisions involving private school participation regarding the size and scope. The finding remains.
Finding No. 2023-018 Federal Agency: U.S. Department of Education AL Program: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Award No.: 1H79SM083644-01, 5H79SM083644-02, 5H79SM083644-03, 5H79SM083644-04 6H79SM086344-01M001,6H79SM086344-01M002, 6H79SM086344-01M003 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, document and consistently enforce appropriate review and approval controls over disbursements of program funds. Views of Auditee and Corrective Action Plan: PSS concurs with the finding. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-020 Federal Agency: U.S. Department of Education AL Program: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance Award No.: 6H79SM086344-01M001 and 6H79SM086344-01M002 Area: Special Tests and Provisions - Key Level Management Questioned Costs: Undeterminable Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Further, in accordance with the grant agreement, PSS key level management are required to provide level of effort as follows: Condition For all six (or 100%) key level management personnel required to provide level of effort, PSS did not provide adequate evidence to substantiate that the required level of effort to the program were complied with. Cause: PSS did not provide documentation evidencing the level of effort of key level management personnel. Effect or potential effect: PSS is in noncompliance with applicable key level management requirements. No questioned costs result as we are unable to determine the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should maintain documentation for its compliance with the key level management requirement, such as Notice of Personnel Action (NOPA) forms, certification of time worked under federal programs and payroll registers, among others. Views of Auditee and Corrective Action Plan: PSS concurs with the findings. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-010 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 Nutrition Assistance Program Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $684,138 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. 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. Based on 2 CFR Section 200.317, when conducting procurement transactions under a Federal award, a State must follow the same policies and procedures it uses for procurement with non-Federal funds. Further, in accordance with 2 CFR 180.300, entities that enter into covered transactions must verify that the person with whom they intend to do business is not excluded or disqualified by: (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. Lastly, according to 2 CFR 180.220(b)(1), a procurement transaction is considered a covered transaction if the contract amount is expected or to equal or exceed $25,000. Finding No. 2023-010, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 Nutrition Assistance Program Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $684,138 Condition: 1. Inconsistencies were noted in procurement regulations over local and federal funded transactions. No questioned costs are presented as the extent of noncompliance could not be quantified. 2. CNMI did not verify whether a person or a vendor is excluded or disqualified pursuant to the requirements of 2 CFR 180.300 prior to entering into a covered transaction. Finding No. 2023-010, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 Nutrition Assistance Program Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $684,138 Cause: 1. CNMI does not use the same policies and procedures for procurements under a federal award as with procurements from its non-federal funds under the small purchases method. 2. CNMI’s current policy and procedure for monitoring suspension and debarment status of persons or vendors under a covered transaction is not in accordance with the provisions identified in 2 CFR 180.300. Effect or Potential Effect: CNMI is in noncompliance with applicable procurement and suspension and debarment compliance requirements and questioned costs of $684,138 result for Condition 2. Identification as a Repeat Finding: Finding No. 2022-010 Recommendation: 1. CNMI should revisit its procurement regulations and consider updating applicable sections of the regulations to comply with federal regulations governing federal funds. 2. Responsible CNMI personnel should periodically monitor updates in federal regulations over procurement and suspension and debarment. 3. Establish and implement effective monitoring control over the verification of excluded or disqualified persons or vendors pursuant to CFR Section 180.300, prior to CNMI entering into a covered transaction. Finding No. 2023-010, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 Nutrition Assistance Program Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $684,138 Views of Responsible Officials: Condition 1 - Division of Procurement Services respectfully disagrees with this finding. Procurement Services agrees that the Commonwealth should periodically review its procurement regulations to ensure continued consistency with applicable federal requirements. However, Procurement Services notes that the procurement regulations currently establish procurement thresholds and procedures for locally funded procurements and procurements funded through a combination of local and federal funds. Procurements exceeding applicable small purchase thresholds are required to proceed through other procurement methods authorized under the procurement regulations, including competitive sealed bidding or other approved procurement methods, as applicable. Procurement Services further notes that procurements exceeding the applicable small purchase thresholds are governed by other provisions of the procurement regulations and are therefore not without regulatory direction. Accordingly, Procurement Services does not fully concur that the regulations are inconsistent as described in the finding. Condition 2 - CNMI NAP agrees with this finding. The issue occurred because the previous policies and procedures did not fully document the three allowable verification methods under 2 CFR 180.300 for covered transactions ≥ $25,000. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - CNMI procurement regulations for small purchases are not in accordance with 2 CFR Section 200.317, wherein a State must follow the same policies and procedures it uses for procurement with non-Federal funds when conducting procurement transactions under a Federal award. The condition remains.
Finding No. 2023-013 Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $3,695,208 Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with 2 CFR §200.403(g), non-Federal entities must maintain adequate documentation to support all charges to Federal awards. Condition: Of twenty-two nonpayroll expenditures tested, aggregating $3,695,208 of a total population of $4,435,648, the following were noted: 1. For two (or 9%), CNMI did not provide the invoices and/or contract agreements. No questioned costs are presented as amounts are questioned at Condition 2. 2. For twenty-two (or 100%), CNMI did not provide cancelled checks or related bank statements to provide evidence that payments were properly authorized, were made to eligible parties, and did not constitute improper payments for the following transactions. Finding No. 2023-013, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $3,695,208 Cause: CNMI did not properly enforce their record-keeping and document retention controls. Effect or Potential Effect: CNMI is in noncompliance with applicable activities allowed or unallowed and allowable costs/cost principles compliance requirements and questioned costs of $3,695,208 result for Condition 2. Identification of a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should improve their record-keeping and document retention policies by properly utilizing the database functionality of their current Enterprise Resources Planning (ERP) software, which is Tyler MUNIS. Views of Responsible Officials: Condition 1 - CNMI Department of Finance respectfully disagrees with this finding related to project number FG17010001 (Economic Resiliency Center). CNMI DOF acknowledges that although supporting documentation, such as journal entries, approvals of expense transfers, sole-source justification memo and grantor approval were submitted, copies of the related invoices and/or contract agreement were not included. This omission was an oversight and resulted in a documentation-timing deficiency. Condition 2 - CNMI Department of Finance respectfully disagrees with this finding related to PA Journals 478, 360, 2137 and 335. These transactions pertain to the Department’s Economic Resiliency Center (ERC) project. Due to internal scheduling constraints and the compressed 2-day turnaround to provide supporting documentation to the auditors, the requested documents were not submitted by the specified deadline. This timing issue resulted in the finding; however, it does not reflect a lack of documentation or inadequate record-keeping. CNMI DOF maintains all relevant supporting documentation for these transactions and such documentation is available for review upon request from the Grantor. Finding No. 2023-013, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $3,695,208 Views of Responsible Officials, continued: The Office of Planning and Development (OPD) partially agrees with the finding. OPD reviewed the questioned transactions and supporting documentation available under its custody. Payment documentation has been identified for PA Journals 186, 142, 141, 2670, 270, 4200, 556, 4180, and 913 and is maintained by OPD for review. For PA Journals 191 and 144, OPD verified that the invoice amounts are consistent with Contract No. 32200454; however, the PA Journal effective dates and journal numbers provided in the audit schedule do not correspond with the records reflected in the Munis system. For PA Journals 1585, 1862, 2219, 1138, 197, 593, and 219, additional information is required to complete verification because the PA Journal effective dates and journal numbers differ from the Munis records available to OPD. The referenced invoice amounts alone are insufficient to identify the transactions, as they may represent portions of cost shared expenditures or partial payments associated with larger transactions. Identification of the vendor would significantly assist in locating and reconciling the transactions. Refer to CNMI’s Corrective Action Plan for additional information. Auditor response: Conditions 1 and 2 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. In addition, the program office should coordinate with the CNMI Department of Finance on identifying the PA journal effective dates, journal numbers and vendors that the program could not trace in the Munis system.
Finding No. 2023-014 Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Based on the applicable reporting requirements outlined in the grant agreements, the program is required to submit a Federal Financial Reports (SF-425) on a semi-annual basis. In accordance with applicable reporting requirements outlined in the grant agreements, the program is required to submit SF-271 Outlay Report and Request for Reimbursement for Construction Program for the applicable reporting period. Further, in accordance with applicable reporting requirements outlined in the grant agreements, the program is required to submit Periodic Performance Report on a quarterly and semi-annual basis for the related grants. Lastly, based on 2 CFR section 200.330 Reporting on real property, the federal agency or pass-through entity must require the recipient or subrecipient to submit reports on the status of real property in which the Federal Government retains an interest. Such performance technical reports must be submitted at least annually. Condition: 1. For five (or 63%) of eight SF-425 financial reports tested, CNMI did not provide copies of the reports and supporting underlying accounting records. 2. Of eight SF-271 Outlay Reports and Requests for Reimbursement for Construction Program tested, the following were noted: Finding No. 2023-014, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Condition, continued: a. For six (or 75%), CNMI did not provide copies of the reports and supporting underlying accounting records. b. For one (or 13%), CNMI only provided a copy of the report but not the supporting underlying accounting records. 3. Of twelve Periodic Performance Reports tested, the following were noted: a. For six (or 50%), CNMI did not provide copies of the Periodic Performance Reports. b. For one (or 8%), CNMI did not submit the Periodic Performance Report on a timely basis. Finding No. 2023-014, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Condition, continued: 4. CNMI did not submit the annual Performance Technical Reports for the following grants: Cause: 1. CNMI does not have an established control to ensure that submitted reports are properly maintained and can be extracted in a timely manner. 2. CNMI does not have an established monitoring control to ensure that all the required reports are submitted on a timely basis. Effect or Possible Effect: CNMI is in noncompliance with applicable reporting compliance requirements. No questioned costs are presented as the noncompliance is non-monetary in nature. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should strengthen and enforce compliance with reporting compliance requirements over the following: 1. Establish policies and procedures for recordkeeping and document retention. Finding No. 2023-014, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Recommendation, continued: 2. Establish monitoring procedures to ensure that all the reports required to be submitted are done in a complete and timely manner. Views of Responsible Officials: Condition 1 - For project no. FG17010001 (related to the Economic Resiliency Center), CNMI Department of Finance respectfully disagrees with this finding. The Department was not aware that a documentation request had been submitted through the EY portal. This occurred because the ERC project was grouped with other OPD-related projects within the same EY portal request, resulting in the Department not receiving clear notification that additional documents were required. The Department maintains all relevant supporting documentation for these transactions and such documentation is available for review upon request from the Grantor. The Office of Planning and Development (OPD) partially disagrees with the finding related to Project No. FG26050001 and FG26050006. OPD has located the SF-425 Federal Financial Report for Project No. FG26050001 / Grant Award No. 07-79-07631 for the reporting period ending September 30, 2022, and the report is maintained by OPD and available for review. With respect to Project No. FG26050006 / Grant Award No. ED22SEA3070013, OPD has been unable to locate the referenced SF-425 reports for the reporting periods ending September 30, 2022, and March 31, 2023. However, although the grant was awarded in 2022, the project was not established until June 12, 2023, and grant activities had not commenced during the reporting periods cited in the finding. OPD will coordinate with the Department of Finance to determine whether reporting requirements applied during the referenced periods. Should additional guidance or clarification indicates that such reporting requirements were applicable, OPD will review the information provided and take appropriate action, as necessary. Correspondence from the Department of Finance confirming the project establishment date is available for review. Condition 2a - For project no. FG17010001 (related to the Economic Resiliency Center), Department of Finance respectfully disagrees with this finding. The Department was not aware that a documentation request had been submitted through the EY portal. This occurred because the ERC project was grouped with other OPD-related projects within the same EY portal request, resulting in the Department not receiving clear notification that additional documents were required. The Department maintains all relevant supporting documentation for these transactions and such documentation is available for review upon request from the Grantor. Finding No. 2023-014, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Views of Responsible Officials, continued: OPD respectfully disagrees with the finding related to Project No. 2605210018. OPD has located the SF-271 Outlay Reports and Requests for Reimbursement for Construction Program for Project No. 2605210018 / Grant Award No. 07-79-07562 covering the periods July 1, 2022, through October 31, 2022, and November 1, 2022, through January 9, 2023. These records are maintained by OPD and are available for review. No further corrective action is proposed. OPD has located the requested SF-271 reports and confirmed that they are maintained within its grant records and available for review. OPD will continue maintaining grant records in accordance with applicable record-retention requirements. Condition 2b - OPD respectfully disagrees with the finding. OPD has located supporting accounting records associated with the SF-271 for Project No. 2605210018 / Grant Award No. 07-79-07562 covering the period August 29, 2022, through April 30, 2023, including invoices, purchase orders, and check copies. These records are maintained by OPD and are available for review. No further corrective action is proposed. The requested supporting records have been located and are maintained by OPD for review. OPD will continue maintaining supporting financial documentation in accordance with applicable record-retention requirements. Condition 3a - For project no. FG17010001 (related to the Economic Resiliency Center), Department of Finance respectfully disagrees with this finding. The Department was not aware that a documentation request had been submitted through the EY portal. This occurred because the ERC project was grouped with other OPD-related projects within the same EY portal request, resulting in the Department not receiving clear notification that additional documents were required. The Department maintains all relevant supporting documentation for these transactions and such documentation is available for review upon request from the Grantor. OPD respectfully disagrees with the finding. OPD has located the performance reports for Project No. FG26050001 / Grant Award No. 07-79-07631 and Project No. 2605210018 / Grant Award No. 07-79-07562 for the reporting period ending September 30, 2022. OPD believes the reports referenced in the finding as Periodic Performance Reports are maintained and submitted by OPD as Quarterly Progress Reports (QPRs). These records are maintained by OPD and are available for review. No further corrective action is proposed. The requested performance reports have been located and are maintained by OPD for review. OPD will continue maintaining programmatic records in accordance with applicable record-retention requirements. Finding No. 2023-014, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Views of Responsible Officials, continued: Condition 3b - OPD agrees with the finding. The Periodic Performance Report for Project No. 2605210018 / Grant Award No. 07-79-07562 for the reporting period ending December 31, 2022, was submitted after the required due date. Although operational circumstances at the time contributed to the delay, OPD recognizes the importance of timely reporting and will strengthen internal monitoring procedures to improve tracking of reporting deadlines and support timely submission of all required reports. OPD will implement a reporting calendar and periodic internal reviews to monitor upcoming reporting deadlines and ensure timely submission of all required reports. Condition 4 - For project no. FG17010001 (related to the Economic Resiliency Center), CNMI Department of Finance respectfully disagrees with this finding. Based on the project’s Special Award Conditions, the only reporting requirements identified for this award are the submission of Project Progress Reports and Financial Reports (SF-425). No additional reporting or documentation requirements beyond those explicitly stated were communicated to the Department. Accordingly, the Department requests further clarification from the auditor regarding the specific authority or requirement that forms this basis of this finding, including where such a requirement is documented. A copy of the Special Award Conditions is maintained by the Department and is available for review upon request. OPD respectfully disagrees with the finding. OPD reviewed the grant files, including the applicable Special Award Conditions, for Project No. 2605210018 / Grant Award No. 07-79-07562 and Project No. FG26050001 / Grant Award No. 07-79-07631. OPD was unable to identify a requirement for submission of an Annual Performance Technical Report within the grant terms and conditions governing these awards. The applicable Special Award Conditions have been identified and are available for review. OPD respectfully requests clarification regarding the specific report referenced in the finding and will provide any applicable documentation should an applicable reporting requirement be identified. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 1, 2a, 2b and 3a - CNMI states disagreement; however, CNMI also acknowledges that reports and/or underlying accounting records were not provided. Finding No. 2023-014, continued Federal Agency: U.S. Department of Commerce AL Program: 11.307 Economic Adjustment Assistance Federal Award No.: 07-79-07645, 07-79-07631, 07-79-07562, ED22SEA3070013 Area: Reporting Questioned Costs: -0- Auditor Response, continued: In addition, the setup of ALN 11.307 grouping in the EY portal included the CNMI Department of Finance team, for which the portal triggers email notifications to all individuals that are part of the grouping when new requests are uploaded and/or when due dates are nearing or are overdue. Condition 4 - In accordance with 2 CFR sections 200.330 Reporting on real property, the Federal agency or pass-through entity must require the recipient or subrecipient to submit reports on the status of real property in which the Federal Government retains an interest. Such reports must be submitted at least annually. Based on our examination of the grant awards, Grant Award Nos. 07-79-07645, 07-79-07562, and 07-79-07631 are related to real property that are required to submit Performance technical Reports including Form SF-429 (Real Property Status Report). Documentation that such reporting requirement is not applicable or was waived for the CNMI, was not provided.
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.: D22AP00279, D21AP10223, D20AP00005 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $4,203 Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with the grant agreement, costs may not be incurred, and work may not commence on the project until the Office of Insular Affairs (OIA) has issued an Authorization to Proceed (ATP). Based on 2 CFR 200.403(g), except where otherwise authorized by statute, costs must be adequately documented to be allowable under Federal awards. Condition: 1. Of thirty-five nonpayroll expenditures tested, aggregating $1,470,476 of a total population of $9,317,282, for four (or 11%), CNMI did not provide evidence of grantor approved ATPs. Finding No. 2023-015, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AP00279, D21AP10223, D20AP00005 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $4,203 Condition, continued: 2. Of five payroll expenditures tested, aggregating $10,639 of a total population of $1,285,604, for two (or 40%), CNMI did not provide employees’ timesheets for the selected pay periods, for which the corresponding directly associated costs are also questioned. Cause: 1. CNMI lacks control procedures to ensure that each office receiving federal grants provides a copy of the necessary documentation to the Office of the Grants Management. 2. CNMI did not properly enforce their record-keeping and document retention controls. Effect or potential effect: CNMI is in noncompliance with applicable activities allowed or unallowed and allowable costs/cost principles compliance requirements and questioned costs of $4,203 result, as the projected questioned costs exceeds the $25,000 reportable threshold. Finding No. 2023-015, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AP00279, D21AP10223, D20AP00005 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $4,203 Identification as a Repeat Finding: Finding No. 2022-013 Recommendation: 1. CNMI should improve their record-keeping and document retention policies by properly utilizing the database functionality of their current Enterprise Resources Planning (ERP) software, which is Tyler MUNIS. 2. CNMI should establish controls to ensure that the individual offices who receive grants, process the required documentation timely and upload processed files in MUNIS. Views of Responsible Officials: Condition 1 - The Office of Grants Management (OGM) disagrees with this finding and the questioned costs of $1,400. The ATP document is vested with the Division of Energy (DOE) and not OGM. The award is from OIA; however, not all awards are under the possession of OGM. In this matter, CNMI Department of Energy is the recipient. However, OGM was able to obtain a copy of the document after several phone calls to their office. Document is available for review upon request. Condition 2 - OGM disagrees with this finding and the questioned cost of $2,803. The documents were obtained for both employees and are available for review upon request. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - It was established during the planning stage of the audit that OGM will be responsible for all grant awards, except for CIP and Compact programs. Additionally, multiple follow up communications were sent for the submission of the ATPs but were not provided. Questioned costs are retained, as costs at the time of the audit were not supported by adequate documentation. Condition 2 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. Questioned costs are retained, as costs at the time of the audit were not supported by adequate documentation.
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.: D23AF00036, D22AF00299, D22AF00298 Area: Cash Management Questioned Costs: $972,335 Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Based on 2 CFR 200.305(b)(3), reimbursement is the preferred method when the non-Federal entity requests payment by reimbursement. Additionally, when the reimbursement is used, Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Condition: 1. Six (or 15%) out of forty expenditures selected for testing, the invoices were dated after the approval of the drawdown request. 2. Two (or 22%) out of nine subrecipient expenditures drawn during the year that was selected for testing, invoices were dated after the approval date of the drawdown request. Finding No. 2023-016, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D22AF00299, D22AF00298 Area: Cash Management Questioned Costs: $972,335 Cause: CNMI failed to adhere to their current cash management reimbursement method procedures, and requested for the drawdown of all FY2023 Compact allocated budget, prior to incurring any expenditures for each grant, and by subrecipients. Effect or Potential Effect: CNMI is in noncompliance with applicable cash management compliance requirements and questioned costs of $972,335 result. Identification as a Repeat Finding: Finding No. 2022-014 Recommendation: CNMI should strengthen their monitoring procedures, to ensure that the cash management reimbursement process, is strictly followed, and to ensure that drawdowns are only approved when supported by invoices for transactions that were already incurred, for both their own and subrecipient expenditures. Finding No. 2023-016, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D22AF00299, D22AF00298 Area: Cash Management Questioned Costs: $972,335 Views of Responsible Officials: Conditions 1 to 2 - The Office of Management and Budget (OMB) agrees with this finding. The underlying cause of this issue was the absence of succession planning and cross training, which resulted in a loss of institutional compliance knowledge during a staff transition. When the primary grant administrator unexpectedly left the organization, there was no transition plan, no cross trained backup staff, and no documented standard operating procedure in place. As a result, the departing administrator processed a drawdown request without leaving documentation of the drawdown or the corresponding vendor invoices. The untrained coverage staff, having only been informed that funds were received, subsequently processed the invoices for payment, which led to the timing discrepancy noted in the finding. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories COVID-19 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D18AP00130, D19AP00142, D20AP00005, D20AP00037, D20AP00040, D20AP00117, D20AP00118, D20AP00119, D20AP00120, D20AP00122, D20AP00126, D20AP00127, D20AP00170, D21AP10140, D21AP10141, D21AP10218, D21AX10059, D22AP00236, D22AP00279 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with 2 CFR Section 200.313(b), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures states that the Division of Procurement & Supply (PS) should conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, in accordance with 2 CFR Section 200.313(d)(1), 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 Federal award identification number), the title holder, the acquisition date, the cost of the property, the percentage of the 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. Lastly, 2 CFR 200.313(d)(3) requires that adequate maintenance procedures must be developed to keep the property in good condition. Condition: 1. CNMI could not provide a capital asset listing that would clearly identify which capital assets were procured using the related federal funding. In addition, the CNMI did not provide the program’s schedule of disposals during the fiscal year. Total FY2023 federal capital assets charged to the program amounted to $680,407. No questioned costs are presented as we are not able to quantify the extent of noncompliance. Finding No. 2023-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories COVID-19 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D18AP00130, D19AP00142, D20AP00005, D20AP00037, D20AP00040, D20AP00117, D20AP00118, D20AP00119, D20AP00120, D20AP00122, D20AP00126, D20AP00127, D20AP00170, D21AP10140, D21AP10141, D21AP10218, D21AX10059, D22AP00236, D22AP00279 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Condition, continued: 2. CNMI did not conduct the annual physical inventory count for FY2023 thus, was not able to ascertain if federal capital assets are adequately safeguarded and maintained and are in good working condition. Cause: 1. CNMI lacks human resources and financial management system structure that ensures all federally funded capital assets are traceable to specific programs used to purchase the equipment or real property and that proper monitoring is done to ensure that a capital asset listing is maintained and updated accordingly. 2. CNMI does not have an established policy and procedure to ensure that an annual physical inventory count is performed to verify that federal capital assets are safeguarded and maintained in good working condition. Effect or Potential Effect: CNMI is in noncompliance with applicable equipment and real property management compliance requirements. Questioned costs is undeterminable as CNMI could not provide the program’s capital assets listing. See below for the cumulative dollar amount of property equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2022-015 Finding No. 2023-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories COVID-19 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D18AP00130, D19AP00142, D20AP00005, D20AP00037, D20AP00040, D20AP00117, D20AP00118, D20AP00119, D20AP00120, D20AP00122, D20AP00126, D20AP00127, D20AP00170, D21AP10140, D21AP10141, D21AP10218, D21AX10059, D22AP00236, D22AP00279 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Recommendation: CNMI should strengthen and enforce compliance with equipment and real property management compliance requirements over the following: 1. Consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. 2. Responsible personnel should establish and implement effective monitoring controls to ensure that property records are accurately segregated by federal funding sources and that they are structured to be in accordance with the provisions of 2 CFR 200.313 (d). 3. Implement more stringent monitoring procedures to ensure that the annual physical inventory count is conducted timely and that part of the procedures performed is to verify if the equipment is safeguarded and maintained in good work condition. Views of Responsible Officials: Condition 1 - Division of Procurement Services agrees with this finding. Improvements are needed in the way federally funded assets are tracked and reported. At present, the inventory management system is not configured to readily identify assets by specific federal award number, which makes it difficult to generate reports identifying assets purchased under individual grants. In addition, staffing limitations have affected the Commonwealth's ability to maintain and readily produce this information. Condition 2 - Procurement Services agrees with this finding. Procurement Services agrees that the annual physical inventory required for FY2023 was not completed. As a result, the existence, location, condition, and accountability of all assets could not be fully verified during the audit period. Finding No. 2023-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories COVID-19 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D18AP00130, D19AP00142, D20AP00005, D20AP00037, D20AP00040, D20AP00117, D20AP00118, D20AP00119, D20AP00120, D20AP00122, D20AP00126, D20AP00127, D20AP00170, D21AP10140, D21AP10141, D21AP10218, D21AX10059, D22AP00236, D22AP00279 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Views of Responsible Officials, continued: Refer to CNMI’s Corrective Action Plan for additional information.
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.: D22AF00298, D20AP10168, D17AP00132 Area: Period of Performance Questioned Costs: $-0- Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: 1. CNMI does not maintain any documentation or evidence that supports transactions are being reviewed to ensure that they are incurred within the period of performance. 2. CNMI does not properly monitor whether expenditures are paid prior to the end of the liquidation period. These conditions do not result in questioned costs as these are all non-monetary findings. Cause: 1. CNMI’s current policy and procedure does not include proper documentation of the review being performed to verify that the transactions are valid and still within the period of performance. Finding No. 2023-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AF00298, D20AP10168, D17AP00132 Area: Period of Performance Questioned Costs: $-0- Cause, continued: 2. CNMI does not have any policies and procedures established to monitor and ensure that payment to vendors is liquidated prior to the end of the liquidation period. Effect or Potential Effect: CNMI is in noncompliance with applicable period of performance compliance requirements. No questioned costs identified as the findings are non-monetary in nature. Identification as a Repeat Finding: Finding No. 2022-016 Recommendation: 1. CNMI should update their current policies and procedures to ensure that part of the documentation of checking the allowability of each transaction includes the verification if the expenditures are still within the period of performance. This can be done by attaching, the copy of the grant award, or a certification from the program administrator, or personnel in-charge of checking the allowability of each transaction, that the grant being charged is in compliance with compliance requirements. 2. CNMI should establish monitoring procedures to ensure that checks issued to vendors are cleared by the banks within the liquidation period. The DOF Financial Services could establish a monitoring log for all checks issued for each vendor and each office. The assigned offices should then request a copy from the DOF Financial Services of the monitoring and conduct timely follow-up to each vendor on ensuring the checks are paid. Lastly, CNMI could also adopt a purely ACH payment to ensure that payments are done real-time. Views of Responsible Officials: Conditions 1 to 2 - Capital Improvement Program (CIP) agrees with this finding that a subrecipient expending $750,000 or more in federal awards during its fiscal year was not adequately verified for compliance with Single Audit requirements, including whether corrective actions were implemented to address prior audit findings. Finding No. 2023-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AF00298, D20AP10168, D17AP00132 Area: Period of Performance Questioned Costs: $-0- Views of Responsible Officials, continued: For Grant Award No. D22AF00298 and D20AP10168, the Office of Grants Management (OGM) is unable to provide a response because the Grant Award # provided cannot be located in the current FMIS, nor does the Division of Financial Services, Federal Section, have records of their existence. Proper searches were conducted in the legacy system and in Tyler-MUNIS but were not successful. We recommend that the auditor provide additional details regarding the specific grant award so that the appropriate responsible office can be accurately identified. Furthermore, we do not know whether OGM is the responsible party to answer on behalf of these non-titled projects. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Grant award numbers D22AF00298 and D20AP10168 are indicated at the heading section of the finding, and we have incorporated the respective offices handling the awards within the condition. Further, CNMI provided copies of the grant awards for the audit.
Finding No. 2023-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D23AP00068, D22AF00299, D21AP10043, D21AP10044, D19AP00081, D17AP00132 Area: Subrecipient Monitoring Questioned Costs: $2,399,988 Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. As stated in 2 CFR 200.332(a), pass-through entities are required to verify that potential subrecipients are not suspended and debarred prior to awarding the agreements. The verification can be done through methods indicated in 2 CFR § 180.300 as follows: (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. Additionally, based on 2 CFR 200.332(b), pass-through entities should ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information provided in 2 CFR 200.322(b)(1) to (6). A pass-through entity must provide the best available information when some of the information below is unavailable. A pass-through entity must provide unavailable information when it is obtained. Further, in accordance with 2 CFR 200.332(c), a pass-through entity should evaluate each subrecipient's fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in 2 CFR 200.322(f). Lastly, in accordance with 2 CFR 200.332(d)(2), the pass-through entity’s monitoring of the subrecipient must include following-up to ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity. Condition: 1. Of three subrecipients tested, aggregating $970,384 of a total population of $970,384, the following were noted: Finding No. 2023-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D23AP00068, D22AF00299, D21AP10043, D21AP10044, D19AP00081, D17AP00132 Area: Subrecipient Monitoring Questioned Costs: $2,399,988 Condition, continued: a. For three (or 100%), CNMI did not verify whether the subrecipient is excluded or disqualified pursuant to the requirements of 2 CFR 180.300 prior to entering into a subaward agreement. The subaward date for D22AF00299 is unknown as the subaward agreement was not provided, as noted at Condition 1b. No questioned cost is presented for D23AP00068 as there was no subaward disbursement made during FY2023. b. For one (or 33%), CNMI did not provide the signed and approved subaward agreement. No questioned cost is presented as the amount is questioned at Condition 1a. c. For three (or 100%), CNMI did not perform the risk assessment prior to issuing the subaward agreements to the subrecipients. The subaward date for D22AF00299 is unknown as the subaward agreement was not provided, as noted at Condition 1b. No questioned costs are presented as amounts are questioned at Condition 1a for D23AF00036 and D22AF00299 and there was no subaward disbursement made during FY2023 for D23AP00068. Finding No. 2023-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D23AP00068, D22AF00299, D21AP10043, D21AP10044, D19AP00081, D17AP00132 Area: Subrecipient Monitoring Questioned Costs: $2,399,988 2. For two (or 100%) of two subrecipients that incurred expenditures above $750,000 during the year, CNMI did not perform proper monitoring to ensure that they are subjected to single audit requirements or if they have taken appropriate actions on all deficiencies detected from previous single audits. No questioned cost is presented for D23AF00036 as the amount is questioned at Condition 1a. Cause: 1. CNMI’s current policy and procedures for monitoring the suspension and debarment status of the subrecipient prior to entering a subaward agreement is not tailored to the provisions of 2 CFR 180.300. The currently established procedure of CNMI only identifies suspension or debarment upon occurrences of violation which is an after-the-fact approach rather than a preventive process. Finding No. 2023-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D23AP00068, D22AF00299, D21AP10043, D21AP10044, D19AP00081, D17AP00132 Area: Subrecipient Monitoring Questioned Costs: $2,399,988 Cause, continued: 2. CNMI lacks proper monitoring procedures to ensure that an agreement is executed for every new subaward between the pass-through entity and a new or existing subrecipient. 3. CNMI does not have an established subrecipient risk assessment policy and procedures prior to entering into the subaward agreement and to identify the type of monitoring procedures required to be performed for the subrecipient. 4. CNMI does not have an established policy or procedure that monitors whether a subrecipient that incurs expenditures above $750,000 during the year, has hired the services of a reputable auditor to conduct a single audit engagement and to ensure that follow-up corrective actions have been performed as regards to the deficiencies identified during the previous audits. Effect or potential effect: CNMI is in noncompliance with the subrecipient monitoring compliance requirements and questioned costs of $2,399,988 result. Identification of Repeat Finding: Finding No. 2022-019 Recommendation: CNMI should strengthen and enforce compliance with subrecipient monitoring compliance requirements over the following: 1. Establish policies and procedures for monitoring suspension and debarment status of each subrecipient prior to granting any subaward. The guidance should be reflective of the provisions set by 2 CFR 180.300. Finding No. 2023-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D23AP00068, D22AF00299, D21AP10043, D21AP10044, D19AP00081, D17AP00132 Area: Subrecipient Monitoring Questioned Costs: $2,399,988 Recommendation, continued: 2. Improve and strengthen their monitoring procedures to ensure that all subawards are enforced with a properly accomplished agreement that is in accordance with 2 CFR 200.332(a)(1). 3. Establish policies and procedures to ensure that a risk assessment is conducted prior to entering into a subaward agreement with a subrecipient and to identify the level of monitoring required for each type of subrecipient as a result of the risk assessment. 4. Establish policies and procedures to ensure that subrecipient incurring expenditures above $750,000 are properly monitored, that they follow the single audit requirements and that the corrective actions are implemented as a result of prior year audits. Views of Responsible Officials: Condition 1a - For Grant Award Nos. D23AF00036 and D22AF00299, Office of Management and Budget (OMB) agrees with the finding and the need for a formally written policy and procedures for subrecipient monitoring. OMB has adopted the Department of Finance’s Subrecipient Monitoring Policy and Procedures effective 08/04/25 establishing a formal monitoring suspension and debarment status of each subrecipient prior to granting any subaward. The guidance is reflective of the provisions set by 2 CFR 180.300. Conditions 1a and 1c - For Grant Award No. D23AP00068, Capital Improvement Program (CIP) disagrees with this finding because the required verification was performed. Although documentation was not retained, CIP verifies that all subrecipients comply with OPA requirements before federal funds are awarded. Condition 1b - OMB agrees with the finding. OMB fully executed a subrecipient agreement with the subrecipient on 01/27/23, prior to any grant administration taking place. The adoption of the Department of Finance’s Subrecipient Monitoring Policy and Procedures effective 08/04/25 also further formalizes the process. Finding No. 2023-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00036, D23AP00068, D22AF00299, D21AP10043, D21AP10044, D19AP00081, D17AP00132 Area: Subrecipient Monitoring Questioned Costs: $2,399,988 Views of Responsible Officials, continued: Condition 1c - For Grant Award Nos. D23AF00036 and D22AF00299, OMB agrees with the finding and agrees with the need for a formally written policy and procedures for subrecipient monitoring. OMB has adopted the Department of Finance’s Subrecipient Monitoring Policy and Procedures effective 08/04/25 establishing a formal subrecipient risk assessment prior to entering into the subaward agreement and identifying the type of monitoring procedures to be performed for the subrecipient. Condition 2 - For Grant Award No. D23AF00036, OMB agrees with the finding and agree with the need for a formally written policy and procedures for subrecipient monitoring. OMB has adopted the Department of Finance’s Subrecipient Monitoring Policy and Procedures effective 08/04/25 to perform proper monitoring to ensure that subrecipients are in compliance with single audits. For Grant Award No. D17AP00132, D21AP10043, D19AP00081, and D21AP10044, CIP agrees with the finding that a subrecipient with expenditures exceeding $750,000 during the year was not verified for compliance with single audit requirements, including whether corrective actions were taken to address prior audit findings. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 1a and 1c - CNMI states disagreement for grant award number D23AP00068; however, CNMI also acknowledges that documentation of its verification performed were not kept on file. In accordance with 2 CFR 200.403, costs must be adequately documented to be allowable under federal awards.
Finding No. 2023-021 Federal Agency: U.S. Department of Labor AL Program: COVID-19 17.225 Unemployment Insurance (UI) Federal Award No.: UI-34837-20-55-A-69 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $224,846 Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.403(g), except where otherwise authorized by statute, costs must be adequately documented to be allowable under Federal awards. Condition: 1. For six (or 15%) of forty nonpayroll expenditures tested, aggregating $361,973 of total population of $3,763,528, CNMI did not provide the invoices, benefit payment summaries, and check/ACH payments supporting allowability of costs. Finding No. 2023-021, continued Federal Agency: U.S. Department of Labor AL Program: COVID-19 17.225 Unemployment Insurance (UI) Federal Award No.: UI-34837-20-55-A-69 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $224,846 Condition, continued 2. For three (or 15%) of twenty payroll expenditures tested, aggregating $34,219 of a total population of $1,817,923, CNMI failed to reflect the updated hourly rate per Personnel Action Form (PAF) on the payroll register for the weeks selected for testing. No questioned costs are presented as this relates to internal control. Cause: CNMI did not properly enforce their record-keeping and document retention controls. Effect or Potential Effect: CNMI is in noncompliance with applicable activities allowed or unallowed and allowable costs/cost principles compliance requirements and questioned costs of $224,846 result for Condition 1. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should improve its record-keeping and document retention policies implemented by properly utilizing MUNIS as a database. Finding No. 2023-021, continued Federal Agency: U.S. Department of Labor AL Program: COVID-19 17.225 Unemployment Insurance (UI) Federal Award No.: UI-34837-20-55-A-69 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $224,846 Views of Responsible Officials: Condition 1 - CNMI Department of Labor agrees with this finding, as the supporting documents extracted from Munis were insufficient to support the referenced line items based on the documentation requested. The corresponding payment registers were uploaded on June 8, 2026, to support the entries. Condition 2 - CNMI partially agrees with this finding. The payroll records for Employee Numbers 4381 and 5600 did not reflect the adjusted hourly rates during the weeks selected for testing because the Requests for Personnel Action (RFPAs) associated with the funding awards could not be finalized until the funding was officially awarded. The funding awards tied to the employee contracts during that time were provided through funding opportunities made available under UIPL 16-20, Change 7. The initial application was due to the Employment and Training Administration (ETA) on January 6, 2023. Following submission, communication between the CNMI and ETA regarding revisions and clarifications continued through March 26, 2023. The Notices of Award (NOAs) were subsequently issued on May 19 and May 22, 2023. The budget narrative submitted to ETA included position modifications and salary adjustments intended to be effective April 1, 2023. However, because the NOAs and associated funding were received after that effective date, retroactive RFPAs were initiated beginning June 13, 2023, and were not fully completed until mid-July 2023. As a result, the updated hourly rates were not reflected in the payroll registers for the periods selected for testing. With respect to employee no. 2293, the employee was a regular Department of Labor employee whose employment contract was scheduled to expire on September 30, 2022 and was subsequently renewed to include a salary adjustment. The RFPA for this employee was initiated in September 22, 2022 but did not complete the routing process until late October 2022. As a result, the adjusted hourly rate was not reflected in the payroll registers for the period selected for testing. All employees received the difference between their adjusted salary and initial salary at a later date in the form of a retroactive lump-sum payment. Refer to CNMI’s Corrective Action Plan for additional information. Finding No. 2023-021, continued Federal Agency: U.S. Department of Labor AL Program: COVID-19 17.225 Unemployment Insurance (UI) Federal Award No.: UI-34837-20-55-A-69 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $224,846 Auditor Response: Condition 2 - We acknowledge CNMI’s explanation of the discrepancies in pay rates; however, no documentation was provided to support the difference in pay rates and that employees were retroactively paid. Further, adequate documentation is essential to support internal control procedures over the verification of pay rates, ensuring that the correct rates are paid.
Finding No. 2023-023 Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award No.: FY23001, FY21001 Area: Activities Allowed or Unallowed 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 test of control procedures performed over: a. the review of cost allowability, specifically, the process did not include documentation of review and approval of invoices and contracts; and b. the disbursement process of program funds, 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 and allowability of costs, are not adequately documented or evidenced. Cause: CNMI lacks adequate documentation evidencing its monitoring and review procedures over disbursements of program funds and allowability of costs, including review and approval controls to ensure that checks and ACH payments agree with approved invoice amounts and purchase requisitions are allowed. Effect or Potential Effect: CNMI is in noncompliance with 2 CFR Section 200.303 related to internal control requirements. No questioned costs are identified as the projected questioned costs for the identified noncompliance samples is below the $25K reportable finding threshold. Finding No. 2023-023, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award No.: FY23001, FY21001 Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $-0- Identification of a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should implement, document and consistently enforce appropriate review and approval controls over disbursements of program funds. Views of Responsible Officials: The Department of Public Works agrees with the finding. The Department of Public Works, Technical Services – Highway Branch agrees to be more vigilant in ensuring that all documents are properly reviewed and approved. DPW, TSD – Highway utilizes the Master PR20 log sheet for each fiscal year to track all Voucher for Work performed under Provisions of the Federal Aid and Federal Highway Acts as Amended (form PR20), Current Bills (drawdowns), and payments made on each. However, payments are either mailed or electronically transferred directly to the vendors by the CNMI Treasury Office. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-024 Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award Nos.: 3000013, FY10002, 3000003, FY14001 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with 2 CFR Section 200.313(b), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures states that the Division of Procurement & Supply (PS) should conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, in accordance with 2 CFR Section 200.313(d)(1), 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 Federal award identification number), the title holder, the acquisition date, the cost of the property, the percentage of the 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. Lastly, 2 CFR 200.313(d)(3) requires that adequate maintenance procedures must be developed to keep the property in good condition. Condition: 1. CNMI’s capital asset listing is not prepared in accordance with 2 CFR 200.313(d)(1) and does not contain accurate information regarding the state or condition of the capital assets. Based on the physical inspection performed, some assets are already disposed but still included in the capital asset listing, resulting in the inability to ascertain the completeness of the population. In addition, CNMI did not provide the program’s schedule of disposals during the fiscal year. There was no federal capital assets charged to the program for FY2023. Finding No. 2023-024, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award Nos.: 3000013, FY10002, 3000003, FY14001 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Condition, continued: 2. CNMI did not provide the result of the physical inventory count. Accordingly, we were unable to verify if all capital assets are safeguarded and maintained properly as we did not receive both a capital asset listing that is complete and accurate and a supporting physical inventory count result that would include information of all existing assets. Cause: 1. CNMI lacks human resources and financial management system structure that would ensure all federally funded capital assets are traceable to specific programs used to purchase the equipment or real property and that proper monitoring is done to ensure that a capital asset listing is maintained and updated accordingly. 2. CNMI does not have an established policy and procedure to ensure that the annual physical inventory count is performed and to verify during the count that the federal capital asset is safeguarded and maintained in good working condition. Effect of Potential Effect: CNMI is in noncompliance with applicable equipment and real property management compliance requirements. Questioned costs cannot be determined as CNMI could not provide the program’s capital assets listing. Recommendation: CNMI should strengthen and enforce compliance with equipment and real property management compliance requirements over the following: 1. Consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. 2. Responsible personnel should establish and implement effective monitoring controls to ensure that property records are accurately segregated by federal funding sources and that it is structured to be in accordance with the provisions of 2 CFR 200.313 (d). Finding No. 2023-024, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award Nos.: 3000013, FY10002, 3000003, FY14001 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Recommendation, continued: 3. Implement more stringent monitoring procedures to ensure that the annual physical inventory count is timely conducted and that part of the procedures performed is to verify if the equipment is safeguarded and maintained in good working condition. Identification as a Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Condition 1 - DPW, TSD - Highway Branch agrees with this finding. Highway Branch has consistently tried to work with Procurement Services to update its yearly inventory records to remove all transferred and disposed properties from its inventory record to no avail. Additionally, Procurement Services Division agrees with this finding. Improvements are needed in the way federally funded assets are tracked and reported. At present, the inventory management system is not configured to readily identify assets by specific federal award number, which makes it difficult to generate reports identifying assets purchased under individual grants. In addition, staffing limitations have affected the Commonwealth’s ability to maintain and readily produce this information. Condition 2 - DPW, TSD - Highway Branch agrees with this finding. The Highway Branch has updated its Inventory Form to include the required information such as date acquired, item number, property/tag number, description of property, manufacturer, model, serial number, purchase order number/contract number, condition code, project number, FHWA project number, percentage of federal participation, location, person assigned and the date the inventory was conducted. Additionally, Division of Procurement Services agrees with this finding. The Division agrees that the annual physical inventory required for FY2023 was not completed. As a result, the existence, location, condition, and accountability of all assets could not be fully verified during the audit period. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-025 Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award No.: 0302301, 0103101, 0033301 Area: Procurement and Suspension and Debarment Questioned Costs: $-0- Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CNMI procurement regulation § 70-30.3-205(f)(5) states that the Division of Procurement Services shall prepare a written summary of each bid opening. Condition: 1. Inconsistencies were noted in procurement regulations over local and federal funded transactions. No questioned costs are presented as the extent of noncompliance could not be quantified. Finding No. 2023-025, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award No.: 0302301, 0103101, 0033301 Area: Procurement and Suspension and Debarment Questioned Costs: $-0- Condition, continued: 2. For one (or 13%) of eight current year completed procurements tested, aggregating $601,371 of a total population of $641,920, CNMI did not provide the Bid Opening Summary Sheet. No questioned cost is presented as there were no expenditures incurred during FY2023 for this procurement. Cause: 1. CNMI does not use the same policies and procedures for procurements under a federal award as with procurements from its non-federal funds under the small purchases method. 2. CNMI did not properly enforce their recordkeeping and document retention policies and controls. Finding No. 2023-025, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award No.: 0302301, 0103101, 0033301 Area: Procurement and Suspension and Debarment Questioned Costs: $-0- Effect or Potential Effect: CNMI is in noncompliance with applicable procurement and suspension and debarment compliance requirements. No questioned costs are presented as the extent of noncompliance for Condition 1 could not be quantified and there were no expenditures incurred during FY2023 for the procured transactions at Condition 2. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: 1. The CNMI should revisit its procurement regulations and consider updating applicable sections of the regulations to comply with federal regulations governing federal funds. 2. Responsible CNMI personnel should periodically monitor updates in federal regulations over procurement and suspension and debarment. 3. CNMI should improve their record-keeping and document retention policies implementation by properly utilizing MUNIS as a database. Views of responsible officials: Condition 1 - Division of Procurement Services respectfully disagrees with this finding. Procurement Services agrees that the Commonwealth should periodically review its procurement regulations to ensure continued consistency with applicable federal requirements. However, Procurement Services notes that the procurement regulations currently establish procurement thresholds and procedures for locally funded procurements and procurements funded through a combination of local and federal funds. Procurements exceeding applicable small purchase thresholds are required to proceed through other procurement methods authorized under the procurement regulations, including competitive sealed bidding or other approved procurement methods, as applicable. Finding No. 2023-025, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award No.: 0302301, 0103101, 0033301 Area: Procurement and Suspension and Debarment Questioned Costs: $-0- Views of Responsible Officials, continued: Condition 2 - DPW, TSD-Highway Branch and the Division of Procurement Services respectfully disagrees with this finding. A review of the procurement file confirmed that the Bid Opening Summary Sheet was maintained as part of the official bid package and procurement record for this solicitation. Procurement Services has located the bid opening summary sheet and confirmed that it accurately documents the bid opening results in accordance with applicable procurement requirements. The document remains in the procurement file and is available for review. A copy has been provided for reference. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1- CNMI procurement regulations for small purchases are not in accordance with 2 CFR Section 200.317, wherein a State must follow the same policies and procedures it uses for procurement with non-Federal funds when conducting procurement transactions under a Federal award. Condition 2- CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.
Finding No. 2023-026 Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award Nos.: 0036004, 3000301, 0030301, 0033301, 0317101 Area: Special Tests and Provisions - Quality Assurance Program Questioned Costs: $-0- Criteria: In accordance with 2 CFR 200.303(a), the recipient 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. As stated in 23 CFR 637.205(a), each State Transportation Department (STD) shall develop a quality assurance program which will assure that materials and workmanship incorporated into each Federal-aid highway construction project on the NHS are in conformity with the requirements of the approved plans and specifications, including approved changes. The program must meet the criteria in 23 CFR 637.207. Additionally, in accordance with 23 CFR 637.207(a), each STD’s quality assurance program shall provide for an acceptance program and an independence assurance (IA) program. Further, in accordance with 23 CFR 637.207(a)(1)(i)(A), each STD’s acceptance program shall consist a frequency guide schedules for verification sampling and testing which will have general guidance to personnel responsible for the program and allow adaptation to specific project conditions and needs. Lastly, based on 23 CFR 637.207(a)(2), the IA program shall evaluate the qualified sampling and testing personnel and the testing equipment. Condition: 1. CNMI does not have a Quality Assurance (QA) program that is in accordance with 23 CFR 637.207 and approved by FHWA. 2. CNMI did not provide the listing of verification of sampling activities performed by qualified testing personnel. Accordingly, we were not able to select samples for testing. Cause: 1. CNMI does not have an established quality assurance program that is approved by the FHWA and is in accordance with the requirements of 23 CFR 637.207. Finding No. 2023-026, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award Nos.: 0036004, 3000301, 0030301, 0033301, 0317101 Area: Special Tests and Provisions - Quality Assurance Program Questioned Costs: $-0- Cause, continued: 2. CNMI did not properly document the results of the verification sampling and testing by the assigned inspector to the project. Effect or Potential Effect: CNMI is in noncompliance with the special test and provisions - quality assurance program compliance requirements. No questioned costs are presented as the noncompliance is non-monetary in nature. Identification of a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should strengthen and enforce compliance with special tests and provisions compliance requirements over the following: 1. Develop, document, and implement formal Quality Assurance Program policies and procedures that is in accordance with 23 CFR 637.207 and approved by FHWA. 2. Consider employing qualified personnel or train an employee and assign as designated agent to perform the verification sampling and testing of existing construction contracts that is in accordance with the Quality Assurance Program. Views of Responsible Officials: Condition 1: The Department of Public Works (DPW), Transportation Services Division (TSD) - Highway Branch agrees with the conclusions presented in this finding. In accordance with 23 CFR 637.207, the DPW, TSD – Highway Branch will develop a QA program, policies and procedures that is approved by FHWA; and train employees and assign as designated agent to perform the functions of the QA Program. Finding No. 2023-026, continued Federal Agency: U.S. Department of Transportation AL Program: 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Federal Award Nos.: 0036004, 3000301, 0030301, 0033301, 0317101 Area: Special Tests and Provisions - Quality Assurance Program Questioned Costs: $-0- Views of Responsible Officials, continued: Condition 2: DPW, TSD – Highway Branch agrees with the conclusions presented in this finding and will develop a log sheet to document the results of the sampling and testing performed to include contractor and sub-contractor (if applicable), project numbers, project titles, date and time, location, and the name of the Highway Inspector/Engineer monitoring the project. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-035 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 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: a. the review of cost allowability, specifically, the process did not include documentation of review and approval of purchase requisitions, invoices, payment requests; and b. the disbursement process of program funds, 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 and allowability of costs, are not adequately documented or evidenced. Cause: CNMI lacks adequate documentation evidencing its monitoring and review procedures over disbursements of program funds and allowability of costs, including review and approval controls to ensure that checks and ACH payments agree with approved invoice amounts and purchase requisitions are allowed. Effect or Potential Effect: CNMI 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. Finding No. 2023-035, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Allowable Costs/Cost Principles Questioned Costs: $-0- Recommendation: CNMI should implement, document and consistently enforce appropriate review and approval controls over disbursements of program funds. Views of Responsible Officials: CNMI Department of Finance agrees with this finding. While approval controls are implemented within the Munis financial system and, since the FY2022 system migration, all federal expenditure approvals have been processed in Munis, the supporting evidence was provided to the auditors on April 9, 2026, after the agreed documentation deadline of February 19, 2026, resulting in evidence timing deficiency. CNMI established a Standard Operating Procedure for Internal Control for Federal Grants Management on May 1, 2025, to govern these processes, and management will ensure that going forward the expenditure workflow, not solely the journal entry workflow, is attached to documentation submitted with audit requests and will be included in the required documents checklist; documents of approval are available upon request. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-036 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Matching, Level of Effort, Earmarking 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 maintenance of effort compliance requirements, CNMI lacks documented evidence of review and approval controls over the verification and accuracy of the required financial data used in computing its maintenance of effort compliance requirements. Cause: CNMI lacks documented evidence of review and approval controls over the verification and accuracy of the financial data used in computing its maintenance of effort for compliance with program requirements, which indicates that the internal controls may not be effectively designed or implemented to ensure the accuracy and completeness of the financial data necessary for compliance. Effect or Potential Effect: CNMI 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 the maintenance of efforts compliance requirements. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should implement, document and consistently enforce appropriate review and approval controls over the maintenance of efforts compliance requirements. Finding No. 2023-036, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Matching, Level of Effort, Earmarking Questioned Costs: $-0- Views of Responsible Officials: CNMI Department of Finance agrees with this finding. CNMI acknowledges the absence of documented standard operating procedures and internal controls governing the review and approval of financial data used to compute maintenance of effort (MOE) requirements. Upon completion of the MOE report, CNMI worked closely with the grantor and the state educational agency to compile the required information. Because CNMI does not customarily receive this type of U.S. Department of Education award and received these funds only as part of the COVID 19 relief program, formal procedures were not previously in place. The grant covered by this finding is now closed. Should CNMI receive future awards from this grantor, CNMI will adopt and implement a formal SOP for MOE calculations and related review and approval controls prior to preparing any MOE reports. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-039 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 2201MPCCDD, 2101MPCCC5, 2001MPCCDD Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $71,972 Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, based on 2 CFR 200.403(g), except where otherwise authorized by statute, costs must be adequately documented to be allowable under Federal awards. Condition: For seven (or 18%) out of the forty nonpayroll expenditures tested, aggregating $845,463 of a total population of $18,417,064, CNMI did not provide the purchase orders, contracts, and/or invoice(s) supporting the allowability of the costs. Cause: CNMI did not properly enforce their record-keeping and document retention controls. Effect or Potential Effect: CNMI is in noncompliance with applicable activities allowed or unallowed and allowable costs/cost principles compliance requirement and questioned costs of $71,972 result. Finding No. 2023-039, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 2201MPCCDD, 2101MPCCC5, 2001MPCCDD Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $71,972 Identification as a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should improve their record-keeping and document retention policies implementation by properly utilizing the database functionality of their current Enterprise Resources Planning (ERP) software, which is Tyler MUNIS. Views of Responsible Officials: CNMI CCDF Program agrees with this finding. For seven (or 18%) out of the forty samples tested, CNMI did not provide the purchase order, contract, and/or invoice(s) supporting the allowability of the costs. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-041 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 2101MPCCC5, 2101MPCCDF, 1901MPCCDD Area: Period of Performance Questioned Costs: $95,367 Criteria: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). The Program must liquidate all financial obligations incurred under the federal award not later than two years after the end date of the period of performance as specified in the terms and conditions of the federal award. In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: 1. CNMI does not have any documentation or evidence to provide support that transactions are being reviewed to ensure that they are incurred within the period of performance. This condition does not result in questioned costs as this is an internal control finding. 2. CNMI does not properly monitor whether expenditures are paid prior to the end of the liquidation period. This condition does not result in questioned costs as this is an internal control finding. 3. Of forty expenditures tested, aggregating $817,071 of a total population of $2,171,232, the following were noted: a. For four (or 10%), CNMI did not provide the purchase order or contract to support that expenditures were incurred within the period of performance end date of 09/30/23. Finding No. 2023-041, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 2101MPCCC5, 2101MPCCDF, 1901MPCCDD Area: Period of Performance Questioned Costs: $95,367 Condition, continued: b. For ten (or 25%), CNMI did not provide a breakdown of the batch payments identified in the bank statements to identify and trace the clearance dates of each transaction, to support that the expenditures were liquidated within the liquidation period end date of 09/30/25. Cause: 1. CNMI’s current policy and procedure does not include proper documentation of the review being performed to verify that the transactions are valid and still within the period of performance. Finding No. 2023-041, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 2101MPCCC5, 2101MPCCDF, 1901MPCCDD Area: Period of Performance Questioned Costs: $95,367 Cause, continued: 2. CNMI does not have any policies and procedures established to monitor and ensure that payments to vendors are liquidated within the end of the liquidation period. 3. CNMI did not provide sufficient and appropriate audit evidence to substantiate the expenditures over compliance with applicable period of performance compliance requirements. Effect or Potential Effect: CNMI is in noncompliance with applicable period of performance compliance requirements and questioned costs of $95,367 result. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: CNMI should strengthen and enforce compliance with period of performance compliance requirements over the following: 1. CNMI should update their current policies and procedures to ensure that part of the documentation of checking the allowability of each transaction includes the verification if the expenditures are still within the period of performance. This can be done by attaching the copy of the grant award, or a certification from the program administrator, or personnel in-charge of checking the allowability of each transaction, that the grant being charged is in compliance with the period of performance compliance requirements. Finding No. 2023-041, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 2101MPCCC5, 2101MPCCDF, 1901MPCCDD Area: Period of Performance Questioned Costs: $95,367 Recommendation, continued: 2. CNMI should establish monitoring procedures to ensure that checks issued to vendors are cleared by the banks within the liquidation period. The DOF Financial Services could establish a monitoring log for all checks issued for each vendor and each office. The assigned offices should then request a copy from the DOF Financial Services of the monitoring and conduct timely follow-up to each vendor on ensuring the checks are paid. Lastly, CNMI could also adopt a purely ACH payment to ensure that payments are done real-time. 3. CNMI should improve their record-keeping and document retention policies implementation by properly utilizing the database functionality of their current Enterprise Resources Planning (ERP) software, which is Tyler MUNIS. Views of Responsible Officials: Conditions 1 and 3a - CNMI CCDF Program agrees with this finding. To strengthen oversight and ensure adequate accountability over Federal awards, the CNMI CCDF Program has implemented a filing system where all documents relating to a federal award are properly maintained and labeled for accessibility. This system became effective on October 1, 2025. Conditions 2 and 3b - CNMI CCDF Program agrees with this finding and acknowledges the need to strengthen internal controls to ensure that all expenditures are cleared by the bank before the end of the liquidation period. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-042 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 1901MPCCDD, 2001MPCCC3, 2001MPCCDD, 2101MPCSC6, 2101MPCDC6, 2101MPCCC5, 2101MPCCDF Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $-0- Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: CNMI did not maintain sufficient documentation to demonstrate that the results of the health and safety inspections for each provider were properly reviewed and approved. Cause: CNMI’s CCDF Director/Administrator did not provide documented evidence of review and approval of the submitted health and safety inspection reports. Effect or Potential Effect: CNMI’s current policies and procedures are not adequate to ensure and demonstrate that proper review and approval is consistently performed and documented. No questioned cost identified as this is an internal control deficiency. Identification as a Repeat Finding: Finding No. 2022-033 Recommendation: CNMI should implement procedures to ensure that review and approval by the CCDF Director/Administrator of the health and safety requirements inspection reports for each provider is evidenced by a signature or stamp of approval. Finding No. 2023-042, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.575/93.596 CCDF Cluster COVID-19 93.575/93.596 CCDF Cluster Federal Award No.: 1901MPCCDD, 2001MPCCC3, 2001MPCCDD, 2101MPCSC6, 2101MPCDC6, 2101MPCCC5, 2101MPCCDF Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $-0- Views of Responsible Officials: CNMI CCDF Program agrees with this finding. Two types of providers were tested, Licensed center-based programs and license-exempt home-based programs. Refer to CNMI’s Corrective Action Plan for additional information.
Finding No. 2023-043 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program (CHIP) Federal Award No.: 7510515, 7520515, 75X0515 Area: Reporting Questioned Costs: $-0- Criteria: The Program is required to submit quarterly Federal Financial Reports (SF-425) and quarterly Statement of Expenditures (CMS-64) that are accurately presented, comparable and reconcilable. 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: For two (or 50%) of four CMS 64 reports tested, CNMI was not able to provide a reconciliation for the differences noted on the amounts per the submitted reports and per underlying accounting records. Cause: CNMI lacks monitoring controls to ensure that adjusting entries which support the amounts reported in the CMS-64 are tracked and properly documented. Effect or Potential Effect: CNMI has a material weakness on their reporting requirement control. No questioned costs are presented as the noncompliance is non-monetary in nature. Identification as a Repeat finding: Finding 2022-036 Finding No. 2023-043, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program (CHIP) Federal Award No.: 7510515, 7520515, 75X0515 Area: Reporting Questioned Costs: $-0- Recommendation: CNMI should strengthen and enforce compliance over the implementation of more stringent monitoring mechanisms to ensure reports are accurately presented and reconciled to the underlying accounting records. CNMI should establish monitoring controls to ensure that all adjusting entries are properly tracked and documented so that reported amounts in the CMS-64 are corroborated and substantiated. Views of Responsible Officials: Commonwealth Medicaid Agency (CMA) respectfully disagrees with the auditor’s finding. While the Agency acknowledges that certain supporting documentation was not provided within the timeframe requested during the audit, CMA does not agree that the reported expenditures were unsupported. The Agency experienced resource and staffing constraints that affected its ability to compile and produce all requested documentation within the audit timeline. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: CMA states disagreement; however, CMA also acknowledges that underlying accounting records supporting the variances were not provided.
Assistance Listing, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - 38080710K, 2022 Pass-through Entity - Illinois Department of Public Health (IDPH) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, in order to be allowable under Federal awards, costs must be determined in accordance with generally accepted accounting principles (GAAP), incurred during the approved budget period, and adequately documented. Per 2 CFR 200.510, the auditee must prepare a schedule of federal expenditures (SEFA) for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with § 200.502. Per 2 CFR 200.328, the funding agency establishes the financial reporting basis of accounting. Based on the reimbursement certificate template required by the passthrough funding agency, the recipient should report expenditures from expense activity, as well as cash or in-kind matching contributions where applicable. Condition - Management lacked adequate controls at the transaction level to ensure compliance with activities allowed or unallowed, allowable cost principles, and period of performance, which resulted in the improper inclusion of duplicate costs and costs from a prior fiscal period. Further, a lack of effective controls over financial reporting and over preparation of the SEFA resulted in management reporting activity on a cash basis, inconsistent with the basis of reporting established in Note 1 and with requirements established by the passthrough funding agency. Questioned Costs - $109,149 If Questioned Costs Are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not Be Reported - N/A Identification of How Questioned Costs Were Computed - Questioned costs totaling $49,754 represent a duplicate invoice found as the result of compliance testing. An additional $59,395 of costs were identified during compliance testing from invoices for goods or services received during fiscal year 2022. Context - During a walkthrough of management's processes and controls, we noted management did not have controls in place at the invoice level for 2 of the 3 vendors charged to the program during the fiscal period under audit to ensure compliance with activities allowed or unallowed, allowable cost principles, or period of performance. As the result of compliance testing, we identified 1 invoice in the amount of $49,754 out of 60 samples that was a duplicate transaction of another sample. As the result of compliance testing, we identified 7 out of 60 transactions totaling $59,395 incurred during the fiscal year ended September 30, 2022. Through discussions with management and in an effort to reconcile the SEFA to underlying general ledger expenditure activity incurred during the fiscal period under audit, we noted that the amount on the SEFA reflected cash reimbursed by IDPH and not expenditures incurred during the fiscal period. In addition, for 2 of the 4 quarterly financial reports selected for testing, we noted that amounts requested for reimbursement for those periods were overstated by approximately $217,000 in aggregate, in relation to the underlying expenditure activity incurred at the time of the submission of the financial report to and request for reimbursement from IDPH. Cause and Effect - A lack of effective controls over the preparation of the SEFA could result in material inaccuracies to the SEFA. A lack of effective controls at the transaction level resulted in noncompliance with accounting principles, duplicate charges to the program, and questioned costs. A lack of effective controls over financial reporting resulted in noncompliance with reporting requirements and an inaccurate reflection of activity incurred during the period reported. Recommendation - We recommend management implement effective controls at the transaction level to ensure costs are allowable under the terms and conditions of the grant agreement have not been duplicated within the population of costs charged to the program and are in compliance with cost principles outlined within the Uniform Guidance. In addition, we recommend that management review the Uniform Guidance and grant agreements carefully to understand the required basis of accounting and to implement an effective set of controls to ensure compliance with these requirements. Views of Responsible Officials and Corrective Action Plan - Management has implemented a new review and oversight process related to the process for the grant submissions in question.
Assistance Listing, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - 38080710K, 2022 Pass-through Entity - Illinois Department of Public Health (IDPH) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations (COSO). Per 2 CFR 200.318(a), the non-Federal entity must have an use documented procedures, consistent with state, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a federal award or subaward. The nonfederal entity's documented procurement procedures must conform to the procurement standards identified in §200.317 through §200.327. Per 2 CFR 200.318(h), the non-Federal entity must award contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. Consideration will be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. Further, 2 CFR 200.214 restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Per 2 CFR 200.318(i), the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Condition - Controls were not sufficient to ensure that management has written policies and procedures surrounding procurement that align with Federal Procurement Standards outlined within the Uniform Guidance. Further, controls were not adequate to ensure that the history of procurement decisions was documented. Additionally, controls were not sufficient to ensure checks for suspension and debarment were performed and documented before entering into a covered transaction with third parties. Questioned Costs - $3,000,000 If Questioned Costs Are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not Be Reported - N/A Identification of How Questioned Costs Were Computed - Questioned costs represent procured contractor activity reported on the SEFA not in compliance with Federal procurement standards. Context - Through review of management's various policies and procedures in place related to purchasing, we noted that management does not have policies and procedures in place that align with the federal procurements standards under §200.317 through §200.327 to ensure compliance with these standards. Further, while testing a sample of 2 contracts out of 3 vendors with activity on the SEFA, we noted no documented evidence of the history of procurement, rationale for the method of procurement used, selection of the contract type, basis for contract selection, analysis of cost or price, or checks for suspension and debarment. Cause and Effect - A lack of written policies and procedures has resulted in material noncompliance with federal procurement standards, including standards to ensure checks for suspension and debarment are performed before entering into a covered transaction with third parties. Recommendation - We recommend management implement written policies and procedures, as required by the Uniform Guidance, to ensure compliance with the federal procurement standards under §200.317 through §200.327 of the Uniform Guidance. We also recommend management implement a system of internal controls to ensure procurement decisions are documented, including checks for suspension and debarment to ensure compliance with §200.214. Views of Responsible Officials and Planned Corrective Actions - The Organization will update and formally adopt written procurement, suspension, and debarment policies and procedures to conform to Uniform Guidance requirements and implement procedures to ensure those policies are consistently followed and documented for all federally funded procurements.
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.
Finding No. 2023-010 Federal Agency: U.S. Department of Education AL Program: 84.403 Consolidated Grants to the Outlying Areas Federal Award No.: S403A210001, S403A220001, S403A230001 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 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 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 Repeat Finding: Finding No. 2022-004 Recommendation: PSS should implement, document and consistently enforce appropriate review and approval controls over disbursements of program funds Views of Auditee and Corrective Action Plan: PSS concurs with the finding. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-013 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A200001, S425A210001, S425X210001 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 Repeat Finding: Finding No. 2022-005 Recommendation: PSS should implement compensating, redundant, or adjacent control activities, including documented supervisory reviews and approval checklists, to ensure compliance with federal requirements. Views of Auditee and Corrective Action Plan: PSS concurs with the finding. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-015 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A210001 and S425X210001 Area: Matching, Level of Effort, Earmarking Questioned Costs: Undeterminable 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. In accordance with the terms and conditions in the Grant Agreement, the State Educational Agencies (SEA) will use (a) not less than twenty percent of its ARP-OA SEA allocation to carry out, directly or through subgrants or contracts, activities to address the academic impact of lost instructional time by supporting the implementation of evidence-based interventions; (b) a portion of their ARP-OA SEA allocation to carry out, directly or through subgrants to Local Educational Agencies (LEAs) or through contracts, the implementation of evidence-based summer enrichment programs; (c) and a portion of their ARP-OA SEA allocation to carry out, directly or through subgrants to LEAs or through contracts, the implementation of evidence-based comprehensive afterschool programs. Condition: PSS did not maintain or provide adequate supporting documentation to demonstrate compliance with the ARP-OA earmarking requirements. Specifically, PSS did not provide budgetary documentation evidencing that the required portions of ARP-OA funds were allocated and expended for allowable evidence-based interventions, summer enrichment programs and comprehensive afterschool programs. Questioned costs are undetermined as we are unable to quantify the extent of noncompliance. Cause: PSS does not have an effective internal control over financial documentation related to earmarked ARP-OA funds. PSS lacks established procedures to ensure that budget allocations and supporting record related to earmarking requirements are properly prepared, retained and readily available for audit and compliance reporting purposes. Effect or potential effect: PSS is in noncompliance with the earmarking requirements for the ARP-OA program. Questioned costs are undeterminable as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should strengthen internal controls over ARP‑OA earmarking compliance by establishing and implementing formal procedures to ensure that: 1. Required earmarking allocations are clearly identified in budgets; and 2. Supporting documentation is retained, organized, and readily available for audit and compliance review purposes. Views of Auditee and Corrective Action Plan: PSS does not agree with the finding. PSS has allocated and expended more than 20% on evidence-based interventions to address learning loss. Specifically, projects listed under the ARP expense report are mapped directly to learning loss categories (e.g. expenses for summer school, extended learning opportunities, high dosage tutors, etc.). Refer to PSS’ Corrective Action Plan for additional information. Auditor Response: The supporting documentation provided, including the ARPA-OA budget that was resubmitted, did not clearly identify the required earmarking allocations and related expenditures for evidence-based interventions, summer enrichment programs and comprehensive afterschool programs. Recalculation or verification of compliance with the earmarking requirements of the ARP-OA program could not be performed. The finding remains.
Finding No. 2023-016 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A210001 and S425X210001 Area: Special Tests and Provisions - Wage Rate Requirement Questioned Costs: Undeterminable 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. Under 29 CFR 5.5(a), contracts exceeding $2,000 for construction, alteration, or repair of public buildings or public works financed in whole or in part with federal funds must include the required Davis-Bacon labor standards clauses, including the incorporation by reference of all applicable rulings and interpretations (29 CFR parts 1, 3, and 5). Additionally, pursuant to 29 CFR 5.5(a)(3)(ii)(A), contractors or subcontractors must submit weekly, for each week in which any Davis Bacon Act (DBA)- or Related Acts-covered work is performed, certified payrolls to the appropriate Federal agency, if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the certified payrolls to the applicant, sponsor, owner, or other entity, as the case may be, that maintains such records, for transmission to the agency. Condition: 1. For eight (or 100%) of eight construction contracts selected for testing, the required clauses, as identified in 29 CFR 5.5(a)(1) and 29 CFR 5.5(a)(8), were not inserted or referenced in the contract or purchase order. No questioned costs are presented as we are unable to quantify the extend of the noncompliance. 2. For eight (or 100%) of eight construction expenditures selected for testing, PSS did not provide the certified payrolls from contractors or subcontractors for work subject to Davis-Bacon Act requirements. No questioned costs are presented as we are unable to quantify the noncompliance. Cause: PSS did not establish and effectively implement internal control procedures to address or prevent noncompliance of the applicable wage rate requirements. Effect or potential effect: PSS is in noncompliance with applicable wage rate requirements. Questioned costs are undetermined as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should establish and implement effective internal controls to ensure compliance with federal wage rate requirements. At a minimum, PSS should: 1. Ensure all applicable contracts and purchase orders include or reference the required Davis‑Bacon labor standards clauses; 2. Require contractors and subcontractors to submit certified payrolls for all Davis‑Bacon–covered work; and 3. Implement procedures to review, approve, and retain certified payrolls and supporting documentation. Views of Auditee and Corrective Action Plan: PSS concurs with the findings. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-017 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425A/84.425X Education Stabilization Fund Federal Award No.: S425A210001 and S425X210001 Area: Special Tests and Provisions - Private School Participation Questioned Costs: Undeterminable 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. In accordance with 34 CFR 299.7(a)(1), in order to have a timely and meaningful consultation, an agency, consortium, or entity must: (i) Consult with appropriate private school officials during the design and development of the agency, consortium, or entity's program for eligible private school children and their teachers and other educational personnel; and (ii) Consult before the agency, consortium, or entity makes any decision that affects the opportunities of eligible private school children and their teachers and other educational personnel to participate in the applicable program. Additionally, in accordance with 34 CFR 299.7(2), such consultation must continue throughout the implementation and assessment of equitable services. Lastly, based on 34 CFR 299.9 (a)(1), expenditures of funds made by an agency, consortium, or entity under a program listed in 34 CFR 299.6 (b) for services for eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the amount of funds expended for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of those children and their teachers and other educational personnel. Condition: 1. PSS did not provide adequate documentation to verify that there were timely and meaningful consultations with appropriate private school officials during the design and development of federally funded programs and prior to making decisions involving private school participation regarding the size and scope of the equitable services that will be provided to eligible private school children and their teachers, and other educational personnel, the amount of funds available for those services, and how that amount is determined. 2. The amount allocated to eligible private schools is not equal to the amount of funds expended for participating public schools in FY2023 on a per-pupil basis. Since no adequate documentation was provided for the calculation of the amount of funds for eligible private schools as cited at Condition 1, no questioned costs are presented as we are unable to quantify the extent of the noncompliance. Cause: 1. PSS does not perform timely consultations and follow-ups with the eligible private school officials in accordance with provisions of 34 CFR 299.7. 2. PSS does not have controls established to properly monitor the need for consultations, follow-up or corrective actions to ensure that the plans established are being met. 3. PSS does not have procedures in place to properly calculate and monitor that the per pupil amount for both private and public schools are equal. Effect or potential effect: PSS is in noncompliance with the applicable special test and provision requirements of the participation of private school children. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: 1. PSS should adhere to the provisions of 34 CFR 299.7 and ensure that timely consultations with the eligible private schools are conducted. Additionally, PSS should establish controls and procedures to ensure that the results of the consultations are properly monitored and implemented. 2. PSS should establish monitoring procedures to ensure that costs budgeted or allocated to private and public schools will remain equal on a per pupil basis. Views of Auditee and Corrective Action Plan: PSS does not agree with the finding. PSS asserts that timely and meaningful consultations were conducted with private school officials prior to making decisions regarding the size, scope, and funding of equitable services for FY2023. Calculations for the equitable share under the Education Stabilization Funds were performed in accordance with federal regulations, ensuring that per-pupil allocations for eligible private school students and teachers were equitable relative to public school expenditures. PSS maintains that consultation timelines, meeting records, and allocation formulas were maintained. While PSS is continuously refining its administrative workflows, the existing documentation and controls were sufficient to satisfy the requirements of 34 CFR § 299.7. Refer to PSS’ Corrective Action Plan for additional information. Auditor Response: The supporting documentation provided, including the minutes of meetings with private schools, did not demonstrate the required timely and meaningful consultation with appropriate private school personnel during the design and development of federally funded programs and prior to making decisions involving private school participation regarding the size and scope. The finding remains.
Finding No. 2023-018 Federal Agency: U.S. Department of Education AL Program: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Award No.: 1H79SM083644-01, 5H79SM083644-02, 5H79SM083644-03, 5H79SM083644-04 6H79SM086344-01M001,6H79SM086344-01M002, 6H79SM086344-01M003 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, document and consistently enforce appropriate review and approval controls over disbursements of program funds. Views of Auditee and Corrective Action Plan: PSS concurs with the finding. Refer to PSS’ Corrective Action Plan for additional information.
Finding No. 2023-020 Federal Agency: U.S. Department of Education AL Program: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance Award No.: 6H79SM086344-01M001 and 6H79SM086344-01M002 Area: Special Tests and Provisions - Key Level Management Questioned Costs: Undeterminable Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Further, in accordance with the grant agreement, PSS key level management are required to provide level of effort as follows: Condition For all six (or 100%) key level management personnel required to provide level of effort, PSS did not provide adequate evidence to substantiate that the required level of effort to the program were complied with. Cause: PSS did not provide documentation evidencing the level of effort of key level management personnel. Effect or potential effect: PSS is in noncompliance with applicable key level management requirements. No questioned costs result as we are unable to determine the extent of noncompliance. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: PSS should maintain documentation for its compliance with the key level management requirement, such as Notice of Personnel Action (NOPA) forms, certification of time worked under federal programs and payroll registers, among others. Views of Auditee and Corrective Action Plan: PSS concurs with the findings. Refer to PSS’ Corrective Action Plan for additional information.
2023-001: United States Department of Health and Human Services Federal Assistance Listing Number 93.498; Reporting Period 4 COVID-19 Provider Relief Fund and American Rescue Plan Rural Distributions (PRF) Reporting - Material Weakness in Internal Control over Compliance and Material Noncompliance Reporting Period 4 Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: The Center was not able to provide records to support amounts reported for 2021 Total Revenue / Net Patient Charges, a part of the Lost Revenue Calculation on the PRF required reporting. Additionally, the Reporting Period 4 PRF Report did not contain evidence of proper review and approval prior to submission. Cause: The Center had a change in CFO in March 2022. The incoming CFO was unable to locate records used by the prior CFO to support the full lost revenue calculation. Further, Center policy did not require evidence of review to be included on PRF reports prior to submission. Effect: Lost revenue calculation amounts are partially unsupported, and may be materially misstated. Additionally, the Center is unable to demonstrate that the PRF reports were properly reviewed and free of other errors. However, the risk is mitigated as the Center claimed no lost revenue in Period 4. Questioned Costs: None Context/Sampling: Key line items related to the reporting were tested for the Period 4 report. Errors (unsupported amounts) were only noted in the Lost Revenue calculation (amounts reported for 2021 Total revenue). Lost Revenue calculation amounts for 2019, 2020, and 2022 were properly supported. Repeat Finding from Prior Year(s) No Recommendation: Because the PRF program is winding down, no future PRF reports are required to be filed. Accordingly, we recommend that management require the following be maintained for all federal and state program required reports: evidence to support all reported amounts, and evidence that report review occurred prior to submission. Views of Responsible Officials: Management agrees with the finding. Refer to Corrective Action Plan.
Title and Assistance Listing Number of the Federal Program: ALN 94.006 AmeriCorps State and National and ALN 94.006 COVID 19 - AmeriCorps State and National Year Finding Originated: 2022 Compliance Requirement: 2 CFR 200.303 Internal Controls Name of Federal Agency: Corporation for National and Community Service Pass-through Agency: State of Louisiana/Volunteer Louisiana Questioned Costs: None. Condition: During our audit, we obtained an understanding and tested LDSC’s internal control for purposes of planning and performing our audit procedures. In obtaining our understanding and testing LDSC’s internal controls, we determined there were inadequate segregation of duties involving certain aspects of the financial reporting cycle. Criteria: As noted in 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).” Cause: Due to the size of LDSC’s administrative staff, certain duties are performed by the same individual, as follows: • Initiate and approve vendor invoices for payment, • Write checks or initiating electronic disbursements, • Review and approve payroll, including the approver’s payroll • Initiate and approve reimbursements to themselves as the agency head, • Access to check stock, check signing authority, and approval authorization. The following responsibilities over cash receipts are performed by the same individual: • Receive and open mail, • Prepare bank deposits and deposit monies received, • Invoices customers for services provided (host sites). Effect: There is not adequate segregation of duties. Recommendation: To the extent possible, we recommend that board members or the contract accountant become further involved in the financial reporting process; such examples include, but are not limited to: • Approve monthly financial statements, • Bank statements and reconciliations, • Reimbursements (travel, expense, etc.) made to agency head, • Credit card activity initiated by the agency head, • The board of directors should adopt an annual budget and monitor on a periodic basis. We further recommend that management incorporate these recommendations to their financial policies and procedures handbook. This will ensure that financial policies are conducted consistently and in accordance with the expectations set by management and board governance. Additionally, such policies and procedures provide structure within LDSC in the event of employee turnover or absenteeism.
Title and Assistance Listing Number of the Federal Program: ALN 94.006 AmeriCorps State and National and ALN 94.006 COVID 19 - AmeriCorps State and NationalYear Finding Originated: 2023 Compliance Requirement: 2 CFR 200.303 Internal Controls, 2 CFR 200.404, 45 CFR 2522.230 Name of Federal Agency: Corporation for National and Community Service Pass-through Agency: State of Louisiana/Volunteer Louisiana Questioned Costs: None meeting the reporting threshold of $25,000. Condition: For two out of the thirteen living allowance periods tested, approval of the payroll disbursements was not able to be provided. For one of the thirteen living allowance payroll disbursement periods tested, approval was granted, however, the payment did not appear reasonable, as required by 2 CFR 200.404. In this instance, an individual completed approximately 68% of their hourly commitment in the program but was paid approximately 95% of their annual contracted amount. Our sample was not statistically valid. Criteria: As noted in 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).” As noted in 2 CFR 200.404 “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” As noted in 45 CFR 2522.230 “An AmeriCorps program may release a participant from completing a term of service for compelling personal circumstances, as determined by the program, or for cause.” Cause: Internal controls over approval of living allowances are not operating effectively. Effect: Disbursements under the program may not have been for allowable purposes. Recommendation: LDSC should ensure internal controls over approval of living allowances are implemented as designed.
Title and Assistance Listing Number of the Federal Program: ALN 94.006 AmeriCorps State and National and ALN 94.006 COVID 19 - AmeriCorps State and National Year Finding Originated: 2022 Compliance Requirement: 2 CFR 200.303 Internal Controls Name of Federal Agency: Corporation for National and Community Service Pass-through Agency: State of Louisiana/Volunteer Louisiana Questioned Costs: None. Condition: During our audit, we obtained an understanding and tested LDSC’s internal control for purposes of planning and performing our audit procedures. In obtaining our understanding and testing LDSC’s internal controls, we determined there were inadequate segregation of duties involving certain aspects of the financial reporting cycle. Criteria: As noted in 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).” Cause: Due to the size of LDSC’s administrative staff, certain duties are performed by the same individual, as follows: • Initiate and approve vendor invoices for payment, • Write checks or initiating electronic disbursements, • Review and approve payroll, including the approver’s payroll • Initiate and approve reimbursements to themselves as the agency head, • Access to check stock, check signing authority, and approval authorization. The following responsibilities over cash receipts are performed by the same individual: • Receive and open mail, • Prepare bank deposits and deposit monies received, • Invoices customers for services provided (host sites). Effect: There is not adequate segregation of duties. Recommendation: To the extent possible, we recommend that board members or the contract accountant become further involved in the financial reporting process; such examples include, but are not limited to: • Approve monthly financial statements, • Bank statements and reconciliations, • Reimbursements (travel, expense, etc.) made to agency head, • Credit card activity initiated by the agency head, • The board of directors should adopt an annual budget and monitor on a periodic basis. We further recommend that management incorporate these recommendations to their financial policies and procedures handbook. This will ensure that financial policies are conducted consistently and in accordance with the expectations set by management and board governance. Additionally, such policies and procedures provide structure within LDSC in the event of employee turnover or absenteeism.
Title and Assistance Listing Number of the Federal Program: ALN 94.006 AmeriCorps State and National and ALN 94.006 COVID 19 - AmeriCorps State and NationalYear Finding Originated: 2023 Compliance Requirement: 2 CFR 200.303 Internal Controls, 2 CFR 200.404, 45 CFR 2522.230 Name of Federal Agency: Corporation for National and Community Service Pass-through Agency: State of Louisiana/Volunteer Louisiana Questioned Costs: None meeting the reporting threshold of $25,000. Condition: For two out of the thirteen living allowance periods tested, approval of the payroll disbursements was not able to be provided. For one of the thirteen living allowance payroll disbursement periods tested, approval was granted, however, the payment did not appear reasonable, as required by 2 CFR 200.404. In this instance, an individual completed approximately 68% of their hourly commitment in the program but was paid approximately 95% of their annual contracted amount. Our sample was not statistically valid. Criteria: As noted in 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).” As noted in 2 CFR 200.404 “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” As noted in 45 CFR 2522.230 “An AmeriCorps program may release a participant from completing a term of service for compelling personal circumstances, as determined by the program, or for cause.” Cause: Internal controls over approval of living allowances are not operating effectively. Effect: Disbursements under the program may not have been for allowable purposes. Recommendation: LDSC should ensure internal controls over approval of living allowances are implemented as designed.
Criteria: Uniform Grant Guidance (2 CFR 200.303) requires a non-federal entity receiving federal awards establish and maintain internal controls designed to reasonably ensure complaince with federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure that reimbursement is not requested for costs that were refunded or reimbursed by other means.; Condition: Internal controls over compliance failed to identify that amounts refunded or reimbursed by other means did not appropriately reduce the request for reimbursement.; Cause: In one instance, the amount refunded for a returned item was recorded into an account that was not included in the report run to prepare the request for reimbursement. In two other instances, insurance proceeds were received and recorded in a holding account since the repairs had not yet been performed. At the time the repairs were expensed, the insurance proceeds were not manually adjusted to offset the cost in order to reduce the amount requested for reimbursement.; Effect: Requests for reimbursement submitted were overstated by a total of $9,613.16.; Repeat Finding: No.; Recommendation: It is recommended that the System refund the grantee $9,613.16, and establish procedures and internal controls to prevent requesting reimbursement for items that have been refunded or already reimbursed by other means.; Management's Response: The System has contacted the Texas Department of Transportation requesting instructions on refunding the amounts. In addition, they will implement new procedures and controls surrounding the calculation of their request for reimbursement and the handling of insurance proceeds to prevent this from happening moving forward.
Criteria: Uniform Grant Guidance (2 CFR 200.303) requires a non-federal entity receiving federal awards establish and maintain internal controls designed to reasonably ensure complaince with federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure that reimbursement is not requested for costs that were refunded or reimbursed by other means.; Condition: Internal controls over compliance failed to identify that amounts refunded or reimbursed by other means did not appropriately reduce the request for reimbursement.; Cause: In one instance, the amount refunded for a returned item was recorded into an account that was not included in the report run to prepare the request for reimbursement. In two other instances, insurance proceeds were received and recorded in a holding account since the repairs had not yet been performed. At the time the repairs were expensed, the insurance proceeds were not manually adjusted to offset the cost in order to reduce the amount requested for reimbursement.; Effect: Requests for reimbursement submitted were overstated by a total of $9,613.16.; Repeat Finding: No.; Recommendation: It is recommended that the System refund the grantee $9,613.16, and establish procedures and internal controls to prevent requesting reimbursement for items that have been refunded or already reimbursed by other means.; Management's Response: The System has contacted the Texas Department of Transportation requesting instructions on refunding the amounts. In addition, they will implement new procedures and controls surrounding the calculation of their request for reimbursement and the handling of insurance proceeds to prevent this from happening moving forward.
Criteria: Uniform Grant Guidance (2 CFR 200.303) requires a non-federal entity receiving federal awards establish and maintain internal controls designed to reasonably ensure complaince with federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure that reimbursement is not requested for costs that were refunded or reimbursed by other means.; Condition: Internal controls over compliance failed to identify that amounts refunded or reimbursed by other means did not appropriately reduce the request for reimbursement.; Cause: In one instance, the amount refunded for a returned item was recorded into an account that was not included in the report run to prepare the request for reimbursement. In two other instances, insurance proceeds were received and recorded in a holding account since the repairs had not yet been performed. At the time the repairs were expensed, the insurance proceeds were not manually adjusted to offset the cost in order to reduce the amount requested for reimbursement.; Effect: Requests for reimbursement submitted were overstated by a total of $9,613.16.; Repeat Finding: No.; Recommendation: It is recommended that the System refund the grantee $9,613.16, and establish procedures and internal controls to prevent requesting reimbursement for items that have been refunded or already reimbursed by other means.; Management's Response: The System has contacted the Texas Department of Transportation requesting instructions on refunding the amounts. In addition, they will implement new procedures and controls surrounding the calculation of their request for reimbursement and the handling of insurance proceeds to prevent this from happening moving forward.
Allowable Costs/Cost Principles – Cost Allocations, Matching, Level of Effort, Earmarking (CHIP Only) Federal Agency: U.S. Department of Health and Human Services U.S. Department of Agriculture U.S. Department of Education Social Security Administration Federal Program Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Temporary Assistance for Needy Families (TANF) Social Services Block Grant (SSBG) Children’s Health Insurance Program (CHIP) Block Grants for Community Mental Health Services (MHBG) Block Grants for Prevention and Treatment of Substance Abuse (SABG) Medicaid Cluster Aging Cluster (nonmajor) Disability Insurance/SSI Cluster (nonmajor) Money Follows the Person Rebalancing Demonstration (nonmajor) CCDF Cluster (nonmajor) SNAP Cluster (nonmajor) Special Education-Grants for Infants and Families (nonmajor) ALN: 10.557 93.558 93.667 93.767 93.958 93.959 93.775, 93.777, 93.778 93.044, 93.045, 93.053 (nonmajor) 96.001, 96.006 (nonmajor) 93.791 (nonmajor) 93.575, 93.596, 93.489 (nonmajor) 10.551, 10.561 (nonmajor) 84.181 (nonmajor) Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: WIC 6TX700527, 6TX700507 October 1, 2020 – September 30, 2022, October 1, 2021 – September 30, 2023, October 1, 2021 – September 30, 2022, October 1, 2022 – September 30, 2023, October 1, 2022 – September 30, 2024 TANF 2301TXTANF, 2301TXTAN3, 2201TXTANF, and 2201TXTAN3 October 1, 2022 – September 30, 2023 and October 1, 2021 – September 30, 2022 SSBG 2301TXSOSR, 2201TXSOSR and 2101TXSOSR October 1, 2022 – September 30, 2024, October 1, 2021 – September 30, 2023 CHIP 2105TX5021, 2205TX5021, 2305TX3002, 2305TX5021 October 1, 2020 – September 30, 2022, October 1, 2021 – September 30, 2023, October 1, 2022 – September 30, 2024 MHBG 1B09SM087345, 6B09SM087345-01M001, 6B09SM087345-01M002, 6B09SM087345-01M003, 1B09SM087322-01,1B09SM085994-01, 6B09SM085994-01M001, 6B09SM085994-01M002, 6B09SM085994-01M003, 1B09SM083999 -01, 6B09SM083999-01M001, 1B09SM083830-01, 6B09SM083830- 01M001 October 1, 2022 – September 30, 2024, October 17, 2022 – October 16, 2024, October 1, 2021 – September 30, 2023, March 15, 2021 – March 14, 2024, March 15, 2021 – March 14, 2023, and October 1, 2020 – September 30, 2022 SABG 1B08TI085835-01,6B08TI085835-01M001, 6B08TI084673-01M001, 6B08TI084673-01M002, 1B08TI084673-01, 6B08TI083478-01 6B08TI083478- 01M002, 6B08TI083478-01M003, 6B08TI083478-01M004 October 1, 2022 – September 30, 2024, October 1, 2021 – September 30, 2023, and October 1, 2020 – September 30, 2022 Medicaid Cluster 2205TX5ADM, 2205TX5MAP, 2205TXIMPL; 2305TX5ADM, 2305TX5MAP, 2305TXIMPL October 1, 2021 – September 30, 2022, October 1, 2022 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 45 CFR Section 95.507, the State shall submit a cost allocation plan for the State agency as required below to the Director, Division of Cost Allocation (DCA), in the appropriate HHS Regional Office. The plan shall describe the procedures used to identify, measure, and allocate all costs to each of the programs operated by the State agency. The cost allocation plan shall contain the procedures used to identify, measure, and allocate all costs to each benefitting program and activity. Per 45 CFR Section 95.509, the State shall promptly amend the cost allocation plan and submit the amended plan to the Director, DCA, if any of the following events occur, including if other changes occur which make the allocation basis or procedures in the approval cost allocation plan invalid. Condition: HHSC’s approved Public Assistance Cost Allocation Plan (PACAP) expenditures and revenues are initially allocated based on an estimate of Project ID percentages. After actual base statistical data is available, expenditures are reallocated and adjustments between estimated and actual costs are made. The adjustments will result in costs claimed for each period being allocated based on actual base statistics for the same period. Data is updated either by voucher, monthly, quarterly, semi-annually, or annually, depending on the Project ID. HHSC experienced significant delays in updating factors. By the end of the fiscal year, cost allocations had been updated only through August 2022. Although there is no documented policy over when the FMAP should be updated, HHSC will allocate costs at the FMAP that is in effect at the time of the transaction and will reallocate the transactions using the FMAP in effect at the time of the reallocation. This procedure was not followed in 2023 when the costs for four of 40 sample allocations tested in the CHIP program were allocated using a rate other than the current one in effect resulting in noncompliance with matching requirements. Questioned costs: Unknown Context: See “Condition.” Cause: HHSC’s General Ledger Unit is responsible for cost allocations. At the start of fiscal year 2023, the Unit suffered a loss of more than half of its staff due to turnover. Additionally, the current Federal Medical Assistance Percentage (FMAP) rates were in a stepdown process whereby the rate changed quarterly as opposed to yearly which intensified the workload. In addition, since transformation, the number of Public Assistance Cost Allocation Plan (PACAP) methodologies (Project IDs) has increased by 243%. These methodologies have become increasingly more complex, now including over 80 dependent factors of which some comprise more than 100 fund sources each. This huge increase in both volume and complexity has greatly increased calculation labor and risk of error. Effect: Failure to update factor allocations timely can result in questioned costs. Repeat finding: 2022-010, 2021-004, 2020-016, 2019-006, 2018-005, 2017-009, and 2016-024 Recommendation: HHSC should allocate adequate resources to ensure factor allocations are performed and reallocations are updated timely in order to present accurate information. Views of responsible officials: HHSC concurs with the finding.
Allowable Costs/Cost Principles – Cost Allocations, Matching, Level of Effort, Earmarking (CHIP Only) Federal Agency: U.S. Department of Health and Human Services U.S. Department of Agriculture U.S. Department of Education Social Security Administration Federal Program Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Temporary Assistance for Needy Families (TANF) Social Services Block Grant (SSBG) Children’s Health Insurance Program (CHIP) Block Grants for Community Mental Health Services (MHBG) Block Grants for Prevention and Treatment of Substance Abuse (SABG) Medicaid Cluster Aging Cluster (nonmajor) Disability Insurance/SSI Cluster (nonmajor) Money Follows the Person Rebalancing Demonstration (nonmajor) CCDF Cluster (nonmajor) SNAP Cluster (nonmajor) Special Education-Grants for Infants and Families (nonmajor) ALN: 10.557 93.558 93.667 93.767 93.958 93.959 93.775, 93.777, 93.778 93.044, 93.045, 93.053 (nonmajor) 96.001, 96.006 (nonmajor) 93.791 (nonmajor) 93.575, 93.596, 93.489 (nonmajor) 10.551, 10.561 (nonmajor) 84.181 (nonmajor) Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: WIC 6TX700527, 6TX700507 October 1, 2020 – September 30, 2022, October 1, 2021 – September 30, 2023, October 1, 2021 – September 30, 2022, October 1, 2022 – September 30, 2023, October 1, 2022 – September 30, 2024 TANF 2301TXTANF, 2301TXTAN3, 2201TXTANF, and 2201TXTAN3 October 1, 2022 – September 30, 2023 and October 1, 2021 – September 30, 2022 SSBG 2301TXSOSR, 2201TXSOSR and 2101TXSOSR October 1, 2022 – September 30, 2024, October 1, 2021 – September 30, 2023 CHIP 2105TX5021, 2205TX5021, 2305TX3002, 2305TX5021 October 1, 2020 – September 30, 2022, October 1, 2021 – September 30, 2023, October 1, 2022 – September 30, 2024 MHBG 1B09SM087345, 6B09SM087345-01M001, 6B09SM087345-01M002, 6B09SM087345-01M003, 1B09SM087322-01,1B09SM085994-01, 6B09SM085994-01M001, 6B09SM085994-01M002, 6B09SM085994-01M003, 1B09SM083999 -01, 6B09SM083999-01M001, 1B09SM083830-01, 6B09SM083830- 01M001 October 1, 2022 – September 30, 2024, October 17, 2022 – October 16, 2024, October 1, 2021 – September 30, 2023, March 15, 2021 – March 14, 2024, March 15, 2021 – March 14, 2023, and October 1, 2020 – September 30, 2022 SABG 1B08TI085835-01,6B08TI085835-01M001, 6B08TI084673-01M001, 6B08TI084673-01M002, 1B08TI084673-01, 6B08TI083478-01 6B08TI083478- 01M002, 6B08TI083478-01M003, 6B08TI083478-01M004 October 1, 2022 – September 30, 2024, October 1, 2021 – September 30, 2023, and October 1, 2020 – September 30, 2022 Medicaid Cluster 2205TX5ADM, 2205TX5MAP, 2205TXIMPL; 2305TX5ADM, 2305TX5MAP, 2305TXIMPL October 1, 2021 – September 30, 2022, October 1, 2022 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 45 CFR Section 95.507, the State shall submit a cost allocation plan for the State agency as required below to the Director, Division of Cost Allocation (DCA), in the appropriate HHS Regional Office. The plan shall describe the procedures used to identify, measure, and allocate all costs to each of the programs operated by the State agency. The cost allocation plan shall contain the procedures used to identify, measure, and allocate all costs to each benefitting program and activity. Per 45 CFR Section 95.509, the State shall promptly amend the cost allocation plan and submit the amended plan to the Director, DCA, if any of the following events occur, including if other changes occur which make the allocation basis or procedures in the approval cost allocation plan invalid. Condition: HHSC’s approved Public Assistance Cost Allocation Plan (PACAP) expenditures and revenues are initially allocated based on an estimate of Project ID percentages. After actual base statistical data is available, expenditures are reallocated and adjustments between estimated and actual costs are made. The adjustments will result in costs claimed for each period being allocated based on actual base statistics for the same period. Data is updated either by voucher, monthly, quarterly, semi-annually, or annually, depending on the Project ID. HHSC experienced significant delays in updating factors. By the end of the fiscal year, cost allocations had been updated only through August 2022. Although there is no documented policy over when the FMAP should be updated, HHSC will allocate costs at the FMAP that is in effect at the time of the transaction and will reallocate the transactions using the FMAP in effect at the time of the reallocation. This procedure was not followed in 2023 when the costs for four of 40 sample allocations tested in the CHIP program were allocated using a rate other than the current one in effect resulting in noncompliance with matching requirements. Questioned costs: Unknown Context: See “Condition.” Cause: HHSC’s General Ledger Unit is responsible for cost allocations. At the start of fiscal year 2023, the Unit suffered a loss of more than half of its staff due to turnover. Additionally, the current Federal Medical Assistance Percentage (FMAP) rates were in a stepdown process whereby the rate changed quarterly as opposed to yearly which intensified the workload. In addition, since transformation, the number of Public Assistance Cost Allocation Plan (PACAP) methodologies (Project IDs) has increased by 243%. These methodologies have become increasingly more complex, now including over 80 dependent factors of which some comprise more than 100 fund sources each. This huge increase in both volume and complexity has greatly increased calculation labor and risk of error. Effect: Failure to update factor allocations timely can result in questioned costs. Repeat finding: 2022-010, 2021-004, 2020-016, 2019-006, 2018-005, 2017-009, and 2016-024 Recommendation: HHSC should allocate adequate resources to ensure factor allocations are performed and reallocations are updated timely in order to present accurate information. Views of responsible officials: HHSC concurs with the finding.
Activities Allowed and Unallowed, Allowable Costs/Cost Principles, Reporting – Information Technology – Password Configuration Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii ALN: 14.228 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Various Various Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non_x0002_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). Condition: MIP is GLO’s accounting application that serves as the agency’s system of record for budget, payroll, cash transactions, accounts receivable, and accounts payable. During our testing, we noted that Active Directory password configurations and the MIP lockout configurations do not adhere to the password policy defined in GLO’s Identification and Authentication policies or defined best practices. Questioned costs: None. Context: See “Condition.” Cause: GLO did not have processes in place to enforce password policies as outlined in the agency’s Identification and Authentication policies. Effect: Failure to follow GLO’s password policy increases the risk of inappropriate access. Repeat finding: No Recommendation: We recommend GLO update their password settings to align with the agency’s password policy. Views of responsible officials: We concur with the finding and the recommendation. Of note is that MIP is a standalone system and doesn’t provide the same password complexity and lockout capability that Active Directory offers, so we will address these individually. The risk associated with not having this same capability in the MIP system is somewhat mitigated by MIP being a system that is only available on-premises or via VPN with a valid Active Directory account.
Activities Allowed and Unallowed, Allowable Costs/Cost Principles, Reporting – Information Technology – User Access Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii ALN: 14.228 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Various Various Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should 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: The Community Development and Revitalization (CDR) division of GLO uses TIGR as its primary grant management system of record. It is used to manage and process CDBG-DR and CDBG-MIT grant transactions. During our testing, we noted one of 13 terminations selected for testing did not have their Active Directory and TIGR access revoked upon termination in accordance with GLO’s Account Management policies, which state: 1.8 All access accounts established for contractors, consultants, vendors, and maintenance accounts must be disabled immediately upon termination or completion of the contract period. 1.9 In the event of involuntary termination of users, access must be removed or disabled prior to or at the same time the user is notified of the termination. The employee was terminated on July 5, 2023, however, their access was not removed. Subsequent to audit procedures, management terminated access to the Active Directory on September 25, 2023, and TIGR on September 28, 2023. Management was unable to provide evidence to support that neither system had been accessed between the date of the termination and the date that the system access was removed. We also noted that while management affirmed that a privileged user access review was completed for Active Directory accounts, there was no evidence maintained of the completion date, who the review was performed by, or frequency of review. Questioned costs: None. Context: See “Condition.” Cause: The exception related to the terminated employee was caused by a delay in communication between multiple departments within GLO. The exception related to user access reviews was caused by GLO not maintaining adequate documentation. Effect: Failure to disable and archive accounts for users that have been terminated increases the risk of inappropriate access and noncompliance. Failure to maintain adequate documentation of user access reviews may result in omission of steps in the review process. Repeat finding: No Recommendation: We recommend GLO enhance the existing process to allow for timely communication of terminated employees. Additionally, we recommend GLO develop a policy that outlines the documentation of user access reviews. Views of responsible officials: We concur with the finding and the recommendation and will take action to address the concerns.
Reporting – FFATA Subawards Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii ALN: 14.228 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: B-18-DP-48-0002 January 12, 2021 – January 12, 2033 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should 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). 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, 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) no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made. Condition: GLO’s Contract Department determines subawards that are required to be reported in FSRS under FFATA reporting requirements. These subawards are subsequently provided to GLO’s Federal Finance and Grants Management to report in FSRS. During our testing, we noted the following exceptions: See chart or table in the Schedule of Findings and Questioned Costs. Questioned costs: None. Context: See “Condition.” Cause: Subawards were inadvertently omitted from the information provided to Federal Finance and Grants Management resulting in untimely submission. Effect: Failure to submit FFATA subawards timely may lead to noncompliance with federal requirements. Repeat finding: No Recommendation: We recommend that management establish standard operating procedures in order to guarantee accurate support and timely communication between departments to ensure timely submission of required reports. Views of responsible officials: We agree that two sub-awards were inadvertently omitted from the information provided to Federal Finance and Grants Management, resulting in an untimely submission.
Reporting – PR28 Financial Summary Report Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii ALN: 14.228 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: B-22-DC-48-004 September 1, 2022 – September 1, 2029 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non_x0002_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 U.S. Department of Housing and Urban Development (HUD) notice CPD-21-11, when generating the PR28 PER Financial Summary in IDIS, states have the ability to enter various adjustment parameters to data summarized from within IDIS. These adjustments are specific to each individual PR28 PER Financial Summary and are displayed in the report output. For any PR28 PER Financial Summary where the grantee made adjustments, the grantee must attach an explanation to the report. Condition: Texas Department of Agriculture (TDA) is required to submit the PR28 Financial Summary report and record any necessary adjustments to the financial report. During our testing, we noted TDA did not make the necessary adjustments to match supporting documentation from TDA accounting systems. The following adjustments were not reported as follows: Line B13: Adjustment to compute total set aside for State Administration - $421,994 Line B21: Adjustment to compute total redistributed – ($2,630,787) Line B24: Adjustment to compute total not yet distributed - $2,181,312 Line D47: Adjustments to compute total subject to PS cap – ($5,756) Line D56: Adjustments to compute total subject to P/A cap – ($5,756) Questioned costs: None. Context: See "Condition" Cause: While management maintained supporting documentation, they failed to make the appropriate adjustments to PR28 Financial Summary Report. Effect: Failure to report accurate data on the PR28 Financial Summary report could compromise HUD’s ability to monitor CDBG expenditures and compliance with statutory requirements. Repeat finding: No Recommendation: TDA should enhance internal controls surrounding reporting to ensure accurate data is being outputted in accordance with the requirements of the respective report. Views of responsible officials: TDA agrees with the finding. TDA acknowledges that the appropriate adjustments are not reflected in the PR-28 report originally submitted for Program Year 2022.