Finding 2023-002 – Review of Income Eligibility and Verification System (IEVS) Reports Program: Temporary Assistance for Needy Families (TANF) Assistance Listing No.: 93.558 Federal Agency: U.S. Department of Health and Human Services Passed Through: State of California, Department of Social Services Award Year: Fiscal Year 2022-2023 Compliance Requirement: Special Tests and Provisions Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.303 states that the non-Federal entity (County) 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. This includes timely reviews of the IEVS reports for the TANF program. Condition Three instances were identified where the IEVS reports were not reviewed within forty-five days of receipt, in violation of program regulations. Cause of Condition Eligibility staff did not process and review IEVS reports timely due to departmental staffing shortages, high vacancy rates, and training and preparation efforts of the statewide migration into the CalSAWS System. There was an average of 18% vacancy rate during this rating period. Also, the Department of Health Care Services (DHCS) stopped transmitting Applicant IEVS files to CalWIN on March 2, 2023, through June 2023. This was due to the Franchise Tax Board (FTB) annual data not being available. The stoppage during this timeframe incurred contradictory information to staff who thought they were not supposed to process all reports. Repeat Finding No. Effect of Condition The County is not in compliance with the IEVS special tests and provisions requirement related to the program. Recommendation Management should develop and implement a system to ensure that IEVS reports are reviewed within the required timeframe. This may include: • Updating internal policies and procedures to clearly define the timeframe for IEVS review. • Implementing a tracking system to monitor the receipt and review of IEVS reports. • Providing training to staff on the importance of timely IEVS review procedures. Management Response and Corrective Action Plan A reminder message will be sent to the appropriate staff to process Applicant IEVS within 45 days of application processing and renewals to ensure compliance of review of IEVS report. Internal policies such as Workflows will be reviewed and updated with IEVS report processing if possible. Also, an annual IEVS refresher training will be issued to staff who are required to process them. We also intend to have multiple Eligibility Worker recruitments throughout the year to address staffing shortages/reducing vacancy rate.
Finding 2023-002 – Review of Income Eligibility and Verification System (IEVS) Reports Program: Temporary Assistance for Needy Families (TANF) Assistance Listing No.: 93.558 Federal Agency: U.S. Department of Health and Human Services Passed Through: State of California, Department of Social Services Award Year: Fiscal Year 2022-2023 Compliance Requirement: Special Tests and Provisions Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.303 states that the non-Federal entity (County) 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. This includes timely reviews of the IEVS reports for the TANF program. Condition Three instances were identified where the IEVS reports were not reviewed within forty-five days of receipt, in violation of program regulations. Cause of Condition Eligibility staff did not process and review IEVS reports timely due to departmental staffing shortages, high vacancy rates, and training and preparation efforts of the statewide migration into the CalSAWS System. There was an average of 18% vacancy rate during this rating period. Also, the Department of Health Care Services (DHCS) stopped transmitting Applicant IEVS files to CalWIN on March 2, 2023, through June 2023. This was due to the Franchise Tax Board (FTB) annual data not being available. The stoppage during this timeframe incurred contradictory information to staff who thought they were not supposed to process all reports. Repeat Finding No. Effect of Condition The County is not in compliance with the IEVS special tests and provisions requirement related to the program. Recommendation Management should develop and implement a system to ensure that IEVS reports are reviewed within the required timeframe. This may include: • Updating internal policies and procedures to clearly define the timeframe for IEVS review. • Implementing a tracking system to monitor the receipt and review of IEVS reports. • Providing training to staff on the importance of timely IEVS review procedures. Management Response and Corrective Action Plan A reminder message will be sent to the appropriate staff to process Applicant IEVS within 45 days of application processing and renewals to ensure compliance of review of IEVS report. Internal policies such as Workflows will be reviewed and updated with IEVS report processing if possible. Also, an annual IEVS refresher training will be issued to staff who are required to process them. We also intend to have multiple Eligibility Worker recruitments throughout the year to address staffing shortages/reducing vacancy rate.
(2023-030) Title: Internal control over P-EBT Food Benefits needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Pandemic EBT Food Benefits (P-EBT) (COVID-19) Assistance Listing Number: 10.542 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $4,271 Likely Questioned Costs: $4,862,998; likely questioned costs were projected by dividing the known questioned costs in the sample by total Pandemic Electronic Benefit Transfer (P-EBT) benefits tested to establish an error rate, then applying that error rate to total P-EBT benefits issued in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 274.5; Families First Coronavirus Response Act (Public Law 116-127), Section 1101; State Plan for Pandemic EBT: Children in School/Child Care 2021-2022; State Plan for Pandemic EBT: Children in School and Child Care, Summer 2022 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The State is required to maintain EBT issuance, inventory, reconciliation, and other accountability records for a period of three years. The State agency shall control all issuance documents which establish household eligibility while the documents are transferred and processed within the State. The State agency shall use numbers, batching, inventory control logs, or similar controls from the point of initial receipt through the issuance and reconciliation process. The Department must carry out the P-EBT program, authorized by the Families First Coronavirus Response Act (FFCRA), in accordance with the State agency plans approved by the U.S. Department of Agriculture (USDA). FFCRA allows the Department of Education (DOE) to release necessary student information to the Office for Family Independence (OFI) regarding participation in the National School Lunch Program and School Breakfast Program for purposes of administering the P-EBT program. The State was required to submit plans to USDA as a precondition for participation in the P-EBT program. The plans outline the proposed framework for operating the program including details on how benefits will be issued, estimates for the total amount of P-EBT benefits and the number of children participating, tentative issuance schedules, and how the State will identify eligible school children and children in child care. Two separate plans were approved by USDA for P-EBT benefit issuances during fiscal year 2023: School Year 2021-2022 and Summer 2022. Condition: FFCRA authorized the establishment of the P-EBT Food Benefits program in response to the COVID-19 public health emergency. The P-EBT program is administered by OFI, with support from DOE, and provides nutrition assistance for school-age children who would have received free or reduced price school meals under the National School Lunch Program and School Breakfast Program, and children in child care whose child-care facility was closed or had reduced attendance or hours due to COVID-19. As outlined in the State’s USDA-approved plans, OFI established an agreement with DOE to provide information required for issuance of P-EBT benefits to eligible children. DOE provided student data as a starting point for eligibility determinations under the P-EBT program. OFI utilized this information to apply additional eligibility criteria, add information for children under six, calculate appropriate P-EBT benefits, and build benefit issuance files for processing. The State plans and underlying agreement between OFI and DOE establish OFI as the responsible party for the maintenance of data used for determining client eligibility and distributing benefits. Federal guidance over the P-EBT program outlines that audit procedures provide assurance that the Department has established and implemented processes to properly determine program eligibility and benefit levels. The Office of the State Auditor (OSA) reviewed policies and procedures related to OFI’s issuance of P-EBT benefits, and identified the following: • OFI does not have policies and procedures in place to require performance of an independent review, reconciliation, or verification of data provided by DOE to ensure all eligibility criteria are met prior to issuance of P-EBT benefits. A reliance is placed on algorithms within DOE’s data extracts to ensure compliance with eligibility requirements outlined in the State’s approved plan. • OFI does not have documented policies and procedures in place for the data cleaning process applied to files received from DOE. OFI conducts data cleaning on all data files provided by DOE before issuing P-EBT benefits. The cleaning process includes changes such as reformatting zip codes or invalid field lengths, and modifications for inconsistent dates, invalid characters, duplicated data, and invalid address data. Documentation of changes made as a result of the cleaning process is not retained by the Department. • OFI does not have documented policies and procedures in place for system integration testing (SIT) and user acceptance testing (UAT) of P-EBT issuance files. The files built by OFI undergo SIT and UAT prior to transmission for benefit issuance, which includes running a test upload of benefit issuance files and comparing the data input to the resulting output and reviewing a sample of individual benefit issuances. Because documented policies and procedures do not exist, the format, documentation, and results of these testing processes are inconsistent. OSA requested original data files containing client and benefit issuance information utilized by OFI during fiscal year 2023 for all P-EBT issuances that occurred to verify consistency with the State’s USDA-approved plans and compliance with Federal requirements. OSA tested P-EBT benefits provided to 60 households during the fiscal year; however, some households had multiple students receiving benefits. This resulted in a test of 76 P-EBT benefit issuances which identified the following: • For 22 students that received school year P-EBT benefits, OSA was unable to verify eligibility criteria relating to school status, resulting in overpayments totaling $1,534. • For four students that received school year P-EBT benefits, OSA was unable to verify eligibility criteria for free or reduced-price school meals, resulting in overpayments totaling $1,564. • For three students that received summer P-EBT benefits, OSA was unable to confirm the students’ enrollment in school in June 2022, resulting in overpayments totaling $1,173. OFI did not maintain adequate documentation in support of these P-EBT benefit payments totaling $4,271, as required by the agreement between OFI and DOE, and as outlined in the approved State plans. OSA selected a non-statistical random sample. In addition, it was noted through audit testing that OFI does not consistently utilize identification numbers for benefit issuance tracking. P-EBT benefits were issued to existing household EBT cards, under pandemic-related identification numbers, and under child identification numbers; however, the documentation maintained for P-EBT benefit issuances is only tracked by child identification number. This results in an inability to properly monitor benefit issuances to ensure that P-EBT benefits are not duplicated. Context: In fiscal year 2023, the State provided approximately 104,000 P-EBT clients with $37.9 million in Federal benefits. OSA identified 29 unsupported P-EBT benefit issuances out of 76 benefit issuances tested, which represents an error rate of approximately 38 percent. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department establish policies and procedures to ensure that: • OFI reviews and reconciles data received from DOE to support eligibility determinations prior to P-EBT benefit issuance; • the data cleaning, SIT, and UAT processes are documented and consistent; and • all documentation in support of P-EBT eligibility determinations and allowability of resulting benefit issuances can be provided in accordance with Federal regulations. In addition, we recommend that the Department review all benefit issuances noted in the Condition of this finding to ensure that unallowable costs are identified and reported to USDA. Corrective Action Plan: See F-17 Management’s Response: The Department partially agrees with this finding. The Department agrees three students that received summer P-EBT benefits were overpaid $391 each. The Department disagrees with the following Conditions: For 22 students, MDOE was not able to identify the specific student whose continuous absence established those students’ schools’ eligibility date. The P-EBT state plan required at least one student to be absent or remote for at least five consecutive days to establish a school eligibility date and MDOE in fact applied this test and established a school eligibility start date at the time the eligibility files were generated. While the school eligibility start date was captured and preserved in the original files provided to OSA, no student was named. The name of the student was not relevant to other students’ eligibility, and creating or preserving a record of the particular student whose absence conferred eligibility was not a requirement of Maine’s P-EBT plan with FNS, the Department’s MOU with MDOE, or federal P-EBT policy. Further attaching that kind of Personal Identifying Information (PII) to other students’ records would not be appropriate. Additionally, since local educational agencies (LEAs) update the core database throughout the school year and beyond, the results could not be replicated in the course of this audit to retrospectively identify the particular students whose absences conferred eligibility. Neither the omission of the students’ names in the original file nor DOE’s inability to identify such students during the audit establishes that it was improper to issue P-EBT benefits in connection with those students. These students were found eligible based on the best data available to MDOE at the time. Likewise, the Department acknowledges that for four students, MDOE was unable – when requested to do so by the OSA – to locate their economically disadvantaged status in the database updated by LEAs throughout the school year. That does not mean, however, that it was improper to issue P-EBT benefits in connection with those students. These students’ economically disadvantaged status was verified by MDOE and captured in the files at the time of issuance. The Department disagrees that tracking benefit issuance by child identification number is inadequate to monitor benefit issuances and ensure benefits are not duplicated. Child identification numbers are the most reliable way to track and deduplicate issuance. As pointed out in this finding, many households had more than one child. Additionally, some children may have moved from one household to another during the period in question. The Department disagrees with the Context and Likely Questioned Costs: For the reasons detailed above, only three – not 29 – of the students sampled were established to have been issued benefits in error. OSA’s calculations should be adjusted accordingly. The Department disagrees with the Causes: OSA is incorrect to conclude that OFI should have reviewed, reconciled, and verified data provided by MDOE prior to issuance for at least two reasons. First, contrary to OSA’s characterization of the partnership, the Department and MDOE were jointly responsible for administering the P-EBT program, with delegated duties defined in the state plan. That federally approved plan considered MDOE data to be accurate and actionable, and it did not contemplate OFI independently validating such data. Second, the Department is not permitted access to the local educational agency data that would have been necessary for the type of review and reconciliation proposed. The Department disagrees with the Recommendations: The three bulleted recommendations cannot be implemented. The P-EBT program ended December 31, 2023. It will not be possible to take corrective action in the implementation of a program that no longer exists. The State is confident that all issuances in the audit period, including those raised by OSA, were issued correctly based on the best information available at the time by the Departments responsible for implementing the P-EBT program. As such and following FNS guidance that no benefits are to be recouped unless the household applied for them directly, OFI will not revisit prior P-EBT decisions as suggested in OSA’s additional recommendation. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The relationship between OFI and DOE in administering the P-EBT program is outlined in the USDA-approved State plans and the documented agreement in place between the Departments. The agreement states that its purpose is to document the terms and conditions under which DOE will disclose to OFI the education records containing student data. It does not place burden on DOE for administration of the P-EBT program. OFI agreed to “establish procedures and systems to ensure that all confidential data processed, stored, and/or transmitted […] will be maintained in a secure manner” and agreed to “maintain this data as other data used for determining client eligibility and distribution of benefits.” OSA provides the following responses to OFI’s disagreements with the exceptions noted in the Condition of the finding: • For the 22 students where eligibility criteria relating to school status could not be verified, OSA recognizes that DOE data is continually updated throughout the year; however, as outlined in the agreement with DOE, OFI is responsible for maintaining data provided by DOE as P-EBT program data used for determining client eligibility and distribution of benefits. • For the four students where eligibility criteria for free or reduced-price school meals could not be verified, documentation in support of program eligibility and allowability was not maintained by OFI as agreed to by both Departments. Furthermore, 2 CFR 200.403 requires Federal program costs to be adequately documented, including maintenance of records sufficient to determine that such funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. OFI did not maintain sufficient documentation to support P-EBT program eligibility and allowability. Contrary to OFI’s contention, it is not DOE’s inability to regenerate and provide data that results in a 38 percent error rate and questioned costs. Rather, it is the negligence of OFI, as the administering agency, to maintain and provide original documentation in support of P-EBT eligibility and benefit issuances. OFI confirms in their response that they failed to maintain such documentation. Without documentation and evidence to substantiate that the P-EBT benefits issued in connection with those students are in line with P-EBT program eligibility requirements, OSA cannot determine that the benefits are allowable; therefore, OSA continues to question the allowability of these costs. In response to OFI’s disagreement surrounding tracking benefit issuance by child identification number, OFI is misconstruing the reported Condition. OSA agrees with OFI’s statement that child identification numbers are the most reliable way to track and deduplicate benefit issuance; however, as stated in the Condition, OFI issued benefits under a variety of identification numbers. As a result, OFI does not have the ability to properly monitor benefit issuances to ensure that P-EBT benefits are not duplicated. In response to OFI’s disagreement that review, reconciliation, and verification of DOE data should be performed prior to benefit issuance, including OFI’s assertion that access to data that would have been necessary for the type of review and reconciliation proposed is not permitted, the USDA-approved State plan for school year P-EBT benefits outlines that: • DOE will provide OFI with every student’s specific daily learning model and absence status that is eligible for free or reduced-price school meals. OFI will identify students that have excused absences for five consecutive days or more and issue the appropriate P-EBT benefit. • DOE will provide OFI with a list of all students eligible for free or reduced-price school meals for use in a reconciliation process. • Utilizing the data provided by DOE, OFI will verify that students were eligible for free or reduced-price school meals and the absence status the school reported for the child and resolve any discrepancies when processing reconciliation applications. The State plan, FFCRA, and the Departments’ agreement in place allows OFI to receive and access the data that would have been necessary for review, reconciliation, and verification of DOE data and resulting P-EBT eligibility. Existing policies and procedures do not adhere to the terms of the State plan as submitted to and approved by USDA. While OFI is confident that all issuances in the audit period were issued correctly based on the best information available at the time, documentation in support of this assertion was not maintained. The State plan further outlines that OFI “commits to reporting all identified over issuances […] including the number of children affected, the dollar value and the nature of the error. Maine will have the ability to track any detected over issuance of P-EBT benefits. This data will be available in report form for analysis to determine if a claim will be established and pursued.” FNS guidance that states no benefits are to be recouped unless the household applied for them directly does not preclude OFI from taking action to identify and report over issuances to Federal oversight. The finding remains as stated. (State Number: 23-1108-05)
(2023-031) Title: Internal control over SNAP eligibility determinations and benefit calculations needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $7,491 Likely Questioned Costs: Undeterminable; incorrectly calculated Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to clients. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.1 and .10; Families First Coronavirus Response Act (Public Law 116-127), Section 2302 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. Individuals or a group of individuals paying a reasonable amount for meals or meals and lodging must be considered boarders and are not eligible to participate in SNAP independently of the household providing the board. State agencies must calculate a household’s expenses based on the expenses the household expects to be billed for during the certification period (12 months). The Families First Coronavirus Response Act (FFCRA) established emergency allotments for households participating in SNAP to provide temporary food needs at the applicable maximum allotment for the household size. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all casefile information necessary to properly process eligibility determinations and benefit calculations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations and related benefit calculations. The Office of the State Auditor (OSA) tested 60 household monthly benefit payments to verify the accuracy of SNAP operations utilizing ACES, and identified the following: • Three underpayments of monthly SNAP benefits totaling $1,242 due to errors by Department personnel while processing manual ACES case file modifications to income information • Four overpayments of monthly SNAP benefits, including: o one benefit overpayment totaling $918 due to income information not updated by the Department in the ACES case file in a timely manner o two benefit overpayments totaling $2,974; an income data exchange with ACES appropriately adjusted income information to the correct prior date in each case file; however, previously issued monthly benefit payments were not recalculated and recovered from households accordingly. o one benefit overpayment totaling $3,599; the client should have been classified as a “boarder” within the household, and therefore, ineligible to participate in SNAP independently of the household providing the board. • One case was identified where household expenses from which benefit amounts were calculated had not been updated since 2018. The Department did not calculate the household’s benefit allotment based on expected annual expenses, in line with the 12-month redetermination period required by SNAP program regulations. The client was paid an accurate total monthly benefit due to the emergency allotment from FFCRA, which provided the maximum benefit amount for this case. OSA selected a non-statistical random sample. The Department does not have adequate policies and procedures in place to ensure that ACES case file modifications, whether manual or system interfaced, that result in adjustments to previously issued monthly SNAP benefits are appropriately processed. This includes a recalculation of previously issued benefits when case file modifications are processed, establishment of corresponding overpayments or underpayments, and related follow-up actions with households. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits may be incorrectly calculated, resulting in households being underpaid and/or overpaid. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement additional policies and procedures to ensure that: • case information entered into ACES is accurate; • automated eligibility determinations and benefit calculations are processed in accordance with Federal regulations; and • recalculations of previously issued benefits and related follow-up actions occur when case file modifications are retroactive. Corrective Action Plan: See F-19 Management’s Response: The Department partially agrees with the exceptions noted; however, the Office for Family Independence has policies in place to ensure that information that is entered into ACES is accurate, that automated client eligibility determinations are processed in accordance with federal law and that recalculations of file modifications are retroactive, as applicable. The Department will continue to review its operating procedures to identify opportunities for improvement. Regarding the one case identified where household expenses had not been updated since 2018: The Head of Household (HH) has been receiving the full standard (FSUA) which means the expense deduction has been changing. The client & Department have been updating the medical expense deduction with timely verifications from the client. On the signed Review, the client checked that the above listed expenses were correct and checked the HH had no other shelter expenses other than the ones listed above. These actions are in compliance with 7 CFR 273.10(d)(4). The Department asserts that adequate safeguards are in place. The cost of implementing the recommendations would exceed the benefit realized in achieving 100 percent accuracy in determining eligibility. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: Regarding the one case noted in Management’s Response, the ACES case file does note changes in household medical expenses and Full Standard Utility Allowance (FSUA) values, including confirmation that the expenses were accurate during the household’s most recent annual recertification; however, the household’s monthly rent expense has been documented as “anticipated” and has not changed since 2018. The expenses have never been verified. 7 CFR 273.10 requires anticipated expenses to be based on the most recent month’s bills. At the time of audit testing, the expense information remained unchanged and unverified for approximately five years. For the seven exceptions identified which were not addressed in Management’s Response, existing policies and procedures resulted in inaccurate benefit payments. OSA recognizes that achieving 100 percent accuracy in determining eligibility and calculating benefit payments would likely not be feasible; however, a sample payment error rate of approximately 12 percent indicates that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 23-1108-02)
(2023-032) Title: Internal control over Medicaid and SNAP deceased client cases needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture U.S. Department of Health and Human Services Assistance Listing Title: SNAP Cluster (COVID-19) Medicaid Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561; 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $8,329 (ALN 10.551) Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) tested a sample of cases where Supplemental Nutrition Assistance Program (SNAP) benefits were issued after the client’s date of death (DOD). Issuance of benefits to a deceased client does not necessarily result in unallowable program costs, as the issued benefits may not be expended; therefore, an error rate cannot be applied to the population and a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.8 and .14 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. State agency action on information items about recipient households shall include review of information and comparison of it to case record information. State agencies must initiate and pursue actions on recipient households within 45 days of the receipt of the information items. States shall establish a system to verify and ensure that benefits are not issued to individuals who are deceased. States shall use the Social Security Administration’s (SSA) Death Master File, obtained through the State Verification and Exchange System. Condition: The Office for Family Independence (OFI) manages the Automated Client Eligibility System (ACES) that is used to determine eligibility for Federal assistance programs, including Medicaid and SNAP. Information maintained in ACES is relied upon by OFI for determining monthly SNAP benefits issued to client Electronic Benefit Transaction (EBT) cards, and by the Office of MaineCare Services for processing Medicaid claims. OFI relies on numerous data sources for identifying and providing client DOD information for input into ACES, including monthly data exchanges with the Maine Center for Disease Control & Prevention (MeCDC) Vital Records and weekly data reports from the SSA’s Death Master File. Federal program regulations require OFI to act on client cases within 45 days of receipt of DOD information. This includes review and comparison of DOD information to ACES case file information, and suspension of program participation and related benefits as warranted. OFI policies for SNAP require deactivation of the client’s EBT card as well as expungement of authorized benefits from the EBT card. If activity occurred on the client’s EBT card subsequent to the DOD, the case must be reported as potential fraud and referred for investigation. The Office of the State Auditor (OSA) obtained DOD information from MeCDC Vital Records and compared it to clients who received Medicaid and SNAP benefits during fiscal year 2023. OSA identified 95 Medicaid claims with service dates after DOD in fiscal year 2023 and reviewed 30 clients with the largest paid claim amounts. Because certain Medicaid claims with service dates after DOD are considered allowable, claims paid on behalf of the deceased clients noted below are not reported as questioned costs: • Two clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. • Two clients did not have a DOD recorded in ACES but were reported as deceased by MeCDC Vital Records. Furthermore, four Medicaid clients with an incorrect DOD identified by OSA during the fiscal year 2022 audit were still not corrected in ACES. OSA identified 671 cases where SNAP benefits were issued more than 52 days following the client’s DOD; this benchmark was applied to denote the 45-day Federal program regulation related to weekly receipt of DOD information. OSA tested 60 of these SNAP cases and identified the following: • 18 single member household clients had EBT card purchase activity after DOD. Of these 18 clients: o 14 clients had transaction activity after DOD that occurred in fiscal year 2023, resulting in unallowable costs totaling $8,329, as follows: • For 13 of the 14 clients, unauthorized transaction activity totaling $7,297 occurred between the actual DOD and the Department’s receipt and processing of the DOD information in ACES. • One of the 14 clients did not have a DOD recorded in their ACES case file at the time of audit testing but was reported as deceased by MeCDC Vital Records; this resulted in $1,032 of unauthorized transaction activity. o Four clients’ DOD occurred in fiscal year 2023 and benefits continued to be authorized and issued; however, the unallowable purchase activity began subsequent to fiscal year 2023. o Four clients were not identified as potential fraud in the ACES case file. As a result, they were not referred for investigation as required by OFI policies. • Five clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. This resulted from the Department’s practice of entering DODs as the last day of the month or an alternative date from public information sources in order to suspend benefits in cases where DOD information is not immediately available; however, the Department had MeCDC Vital Records information at the time of DOD input for all five clients and should have entered DODs based on those records. • One client did not have a DOD recorded in their ACES case file but was reported as deceased by MeCDC Vital Records; benefits were authorized during fiscal year 2023, but no unauthorized transaction activity occurred. • 10 clients’ benefits were not expunged upon receipt of DOD information as required by OFI policies; benefits were only expunged by the system-automated process based on inactivity after 274 days. For 2 of the 10 clients, the EBT card was never deactivated; therefore, benefits remained open and available for use 274 days after DOD. • One client’s case remained open two months after OFI was notified of the client’s DOD, resulting in two months of unauthorized SNAP benefit issuances. • Two clients’ ACES case file information partially matched DOD information from MeCDC Vital Records, including names and dates of birth; however, the client social security numbers did not match. The Department did not review the cases to determine appropriate follow-up action. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately: • 575,000 Medicaid clients with $2.5 billion in Federal benefits. Of the 575,000 Medicaid clients, 9,826 had a DOD in fiscal year 2023. • 127,000 SNAP clients with $484.8 million in Federal benefits. Of the 127,000 SNAP clients, 2,021 had a DOD in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Medicaid claims paid on behalf of deceased clients may go undetected. • SNAP benefits issued to deceased clients may result in unauthorized EBT card purchase activity. • Known questioned costs for SNAP • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that DOD information is received, reviewed, and updated in ACES on a more frequent basis to prevent unallowable Medicaid claim payments, and unauthorized SNAP benefit issuances and EBT card purchase activity. In addition, we recommend that the Department review all client cases noted in the Condition of this finding to ensure that: • ACES case file DOD information is accurate; • SNAP benefits are expunged and EBT cards are deactivated in accordance with existing policies; • cases are identified as potential fraud and referred for investigation as warranted; and • unallowable costs are identified and reported to Federal oversight agencies, and required recoupment activities are pursued. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with this finding and will review the current SOP governing DOD procedures and will implement enhancements to ensure DOD is updated and that related required actions are taken within allowable timeframes. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-04)
(2023-033) Title: Internal control over automated SNAP eligibility certification periods needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $18,090 Likely Questioned Costs: Undeterminable; incorrectly suspending Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to households. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.10 and .12 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP, which includes automatic cutoff of participation for households which have not been recertified at the end of their certification period. SNAP households must be assigned eligibility certification periods of at least six months unless the household is classified as exempt based on program regulations. The State agency must have at least one contact with each SNAP household every 12 months. Submission of periodic eligibility reports is required by non-exempt households. Non-exempt households that are certified for longer than six months must file a periodic report between four months and six months, as required by the State agency. In addition, the State agency must not require the submission of periodic reports by households certified for 12 months or less in which all adult members are elderly or have a disability and no earned income. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all case file information necessary to properly process eligibility determinations and benefit computations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations, including notification letters to clients when 6-month reports and 12-month redeterminations of eligibility are required. All SNAP households, except for elderly and disabled cases with no earned income, are required to submit 6-month reports. In addition, all SNAP households must undergo an annual redetermination of eligibility. Each household’s recertification requirements are indicated by date fields in the ACES case file. If a required report or redetermination is not completed by the date indicated in the applicable field, the case’s monthly SNAP benefit is automatically suspended by the system. The Office of the State Auditor (OSA) tested a sample of 60 cases automatically suspended for failure to complete a required review in fiscal year 2023 to verify the accuracy of automated SNAP operations utilizing ACES. In 23 of the 60 cases tested, OSA identified that ACES incorrectly suspended benefits, as follows: • 20 cases were suspended due to inaccurate information in the applicable ACES date field. The Department identified the issue within ACES and implemented a system reconfiguration to correct review dates; however, the reconfiguration did not account for SNAP 6-month report and annual redetermination requirements. Of the 20 suspensions: o seven cases continued to receive SNAP benefits after a failure to complete required 6-month reports. This resulted in the following benefit overpayments, none of which were identified by the Department: • Two cases were suspended three months after the 6-month reporting requirement, resulting in known overpayments of $959 and $2,410. • Two cases were suspended four months after the 6-month reporting requirement, resulting in known overpayments of $1,597 and $525. • Three cases were suspended five months after the 6-month reporting requirement, resulting in known overpayments of $2,941, $2,376, and $1,818. o six cases were underpaid SNAP benefits totaling $5,941 because of incorrect benefit suspensions, ranging from one to five months prior to the applicable 6-month reporting requirement. o five cases were underpaid SNAP benefits totaling $2,194 because of incorrect benefit suspensions, ranging from 2 to 11 months prior to the annual redetermination requirement. o two cases were never required to submit 6-month reports or annual redeterminations since commencement of SNAP benefits in May 2021 and August 2021. This resulted in overpayments for the entirety of fiscal year 2023 totaling $2,539 and $2,925, respectively. • Three cases were suspended due to inaccurate information in the ACES case file indicating that required reviews were not completed. One case never received an automated ACES notification letter alerting them to complete the required 6-month report because of the system reconfiguration previously noted, and as a result, benefits were suspended. Two cases required annual redetermination information, which was submitted to the Department prior to the benefit suspension date, but benefits ended or lapsed due to untimely or incomplete review by the Department. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. 469 clients were automatically suspended by ACES during fiscal year 2023 due to recertification or redetermination requirements. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight • Automated SNAP eligibility system recertification and suspension criteria was not configured in accordance with Federal regulations. Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • Benefits may be incorrectly suspended, resulting in households being underpaid or overpaid. Recommendation: We recommend that the Department enhance policies and procedures to ensure that automated SNAP eligibility certification periods and related ACES case file fields are properly configured to process benefits in accordance with Federal regulations. In addition, we recommend that the Department identify underpayments and/or overpayments resulting from recertification period errors and take action as warranted. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with the exceptions as noted and has previously taken the necessary steps to eliminate these issues. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-03)
(2023-035) Title: Internal control over SNAP EBT card security needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 274.5 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The State is required to provide the following minimum security and control procedures for EBT cards: secure storage; access limited to authorized personnel; inventory control records; and a periodic review and validation of inventory controls and records by parties not otherwise involved in maintaining control records. Issuance, inventory, reconciliation, and other accountability records must be maintained for a period of three years. Condition: The Supplemental Nutrition Assistance Program (SNAP) provides monthly benefits to eligible households to purchase nutritious foods. The program utilizes Electronic Benefit Transfer (EBT) cards as the mechanism to provide benefits. SNAP benefit information is transmitted to the Electronic Payment Processing and Information Control (EPPIC) system used for EBT. An EBT card is issued using the EPPIC system and mailed to the client’s mailing address. EBT cards that are undeliverable are returned to the regional Department of Health and Human Services office for processing. Upon receipt of a returned EBT card, the Automated Client Eligibility System (ACES) is used to verify a client’s personal information, determine what action to take based on case file information, and document the action through electronic case notes. The Department has assigned responsibility for processing returned EBT cards to one employee. This process includes receipt of returned cards, maintenance of inventory control records including supporting documentation in ACES and EPPIC, and destruction or retransmission of the card. Proper segregation of duties does not exist within the current process, as recordkeeping, custody of EBT cards, and authorization of processing activity should be assigned to different employees. In addition, the State is required to maintain accurate and complete inventory records for returned EBT cards. Returned cards are either destroyed or retransmitted, and are tracked using spreadsheets and related documentation through client case notes in ACES and EBT card activity in the EPPIC system. The Office of the State Auditor (OSA) tested a sample of 60 returned EBT cards to verify the accuracy and completeness of the activity recorded on the inventory tracking spreadsheets, and identified: • one returned EBT card that should have been retransmitted to an updated address was erroneously processed for destruction; • one returned EBT card with a case note documenting an unknown card location and an assumption that the card was erroneously destroyed, so a new card was retransmitted without confirmation of the destruction; • one returned EBT card where processing activity was not documented in a case note until eight months after retransmission; and • one returned EBT card which was recorded on the tracking spreadsheet as retransmitted to an updated address, but no documentation was maintained in the client case file to support that a new address was obtained. OSA selected a non-statistical random sample. A data analysis and cross-match of the inventory tracking spreadsheets identified: • one returned EBT card was erroneously recorded on the destruction spreadsheet twice; and • eight returned EBT cards were processed utilizing inaccurate client information; multiple client names were tied to the same client identification number on the spreadsheets. Quarterly, management monitors the inventory tracking spreadsheets by selecting a sample of returned EBT cards for review; however, this oversight procedure does not detect and correct processing errors on a timely basis. Furthermore, the State is required to maintain secure storage of, and limited access to, EBT cards. The current process does not require proper physical security over returned EBT cards as the returned cards are placed in an open mailbox during processing. While the mailbox is in a secure area of the facility, any employee working within the regional office has access to this mailbox. Existing policies and procedures in place do not provide adequate security over returned EBT cards, including proper segregation of duties, maintenance of accurate and complete inventory control records, and appropriate physical security controls over EBT cards. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. The Department processed 2,447 returned EBT cards; 1,013 were recorded as retransmitted and 1,434 were recorded as destroyed. Cause: • Lack of segregation of duties • Lack of adequate policies and procedures relating to the security and oversight of returned EBT cards Effect: • Potential unauthorized use of EBT cards, which may lead to unallowable costs • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to require adequate security and oversight of returned EBT cards, including proper segregation of duties within the process, maintenance of accurate and complete inventory control records, and increased physical security controls. Corrective Action Plan: See F-20 Management’s Response: Although the Department agrees that errors were identified, these data entry errors were clerical in nature, and do not impact the security of our returned EBT cards. The Standard Operating Procedure for processing returned EBT cards does segregate duties sufficiently. First, all returned cards are received by District Operations in the Lewiston Regional Office, and they are distributed to a separate resource for processing. Second, a clerical resource in the Lewiston office reviews the case to determine the appropriate course of action, and then subsequently takes and logs that action (in spreadsheets and in ACES). Third, the EBT manager performs quality checks on the logs to ensure the proper handling of the cards/cases. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: While OSA recognizes that some of the exceptions noted in the Condition are clerical in nature, instances of unknown card locations, inaccurate processing activity, and untimely or incomplete documentation were also identified. The current procedure does not segregate duties sufficiently. First, inventory control records are not initiated upon receipt by District Operations prior to placement in an unsecured mailbox for processing. Second, as identified in Management’s Response as the clerical resource, the same employee maintains custody of returned EBT cards, determines and authorizes the course of action, has responsibility for inventory control records, and proceeds with physical destruction or retransmission of cards; therefore, there is no segregation between recordkeeping, custody, and authorization of processing activity. The subsequent performance of quality checks by the EBT manager only covers a sample of returned cards and occurs on a quarterly basis. This does not provide segregation of duties within the process. The finding remains as stated. (State Number: 23-1108-01)
(2023-037) Title: Internal control over CNC special reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 170 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Agencies must report each subaward that equals or exceeds the first-tier subaward threshold of $30,000 in Federal funds in the public-facing Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Condition: When an amount exceeding the first-tier subaward threshold is awarded to a subrecipient, the Department must collect and enter data into FSRS. The Department did not report any of its first-tier subawards under the Child Nutrition Cluster (CNC) in FSRS for fiscal year 2023. Context: In fiscal year 2023, the Department was required to report first-tier subawards totaling approximately $70 million under CNC. First-tier subawards account for 88 percent of the program’s fiscal year 2023 expenditures. Cause: Lack of policies and procedures Effect: • Noncompliance with Federal regulations • First-tier subaward information for CNC was not reported to the Federal government. This information may be used for programmatic, policy, or statistical purposes. Recommendation: The Department developed and implemented policies and procedures beginning July 1, 2023; therefore, we recommend that the Department monitor these newly established policies and procedures to ensure that they have been properly implemented. This will ensure subawards meeting or exceeding the first-tier threshold are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The existing procedure for monitoring FFATA reporting now includes Child Nutrition Awards as of 7/1/23. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1203-01)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-041) Title: Internal control over the submission of CNC Schedule of Expenditures of Federal Awards information needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.502 and .510; 7 CFR 250.58(e); U.S. Department of Agriculture Policy No. FD-104 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended, including distribution or use of food commodities. Federal non-cash assistance, such as food commodities must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. For a cluster of programs, the SEFA must list individual Federal programs within the cluster. In meeting the commodity offer value of donated foods for the school food authority, the distributing agency must use the cost-per-pound donated food price posted annually by the U.S. Department of Agriculture (USDA), the most recently published cost-per-pound price in the USDA donated foods catalog, and/or a rolling average of the USDA prices. Each distributing or recipient agency must choose a method of valuing USDA donated foods for audit purposes. In most cases, it is recommended that a distributing or recipient agency use one of the options listed in 7 CFR 250.58(e). Once a method of assigning value to USDA donated foods is selected, it must be used consistently in all its audit activities and the State must maintain a record of the means of valuing donated foods for such purposes. Condition: The Department must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Department submitted exhibits to OSC that: • incorrectly excluded $2.4 million of fresh food distributed to subrecipients and additional commodity items received. • incorrectly reported $1,417 of expenditures under ALN 10.555 National School Lunch Program that should have been reported under ALN 10.556 Special Milk Program. Context: In fiscal year 2023, noncash assistance totaling $2.4 million was not reported to OSC by the Department for inclusion on the SEFA. Noncash assistance for the Child Nutrition Cluster totaled $8.5 million in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Inaccurate reporting of expenditure amounts on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department implement policies and procedures that: • outline the method of valuing USDA donated foods in accordance with Federal regulations. • require a comprehensive review of SEFA schedules prior to submission to OSC. In addition, we recommend enhanced oversight over policies and procedures to ensure they are consistently applied and the SEFA is accurate and complete. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The child nutrition department will create a procedure for reporting the SEFA numbers to DOE Finance. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-02)
(2023-042) Title: Internal control over CNC donated food inventory needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 250.12 and .19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. On an annual basis, the distributing agency must conduct a physical review of donated food inventories at all storage facilities used by the distributing agency and must reconcile physical and book inventories of donated foods. The distributing agency must ensure that a separate inventory record of donated foods is maintained. The distributing agency’s system of inventory management must ensure that donated foods are distributed in a timely manner and in optimal condition. Condition: The Child Nutrition Cluster includes the School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children, and the Fresh Fruit and Vegetable Program. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs, to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools, and to encourage consumption of nutritious agriculture commodities. The Department receives donated foods from the U.S. Department of Agriculture (USDA) for distribution to School Food Authorities (SFAs). In fiscal year 2022, the Department implemented a new inventory system for tracking donated foods. The Office of the State Auditor (OSA) tested 10 donated food items to ensure that the Department had properly tracked the items. OSA reviewed USDA food requests, inventory receipts, and distributions made to SFAs to verify that the documentation corresponded to information in the inventory system and physical inventory counts. OSA identified the following two instances where the records did not agree: • For one food item, system inventory records identified 52 cases more than OSA calculated, and the physical inventory count indicated 41 cases less than the system inventory records. • For the other food item, system inventory records identified nine cases less than OSA calculated, and the physical inventory count indicated 17 cases more than the system inventory records. In addition, for nine of the food items tested, system inventory records did not align with the physical inventory count; variances ranged from 2 to 41 cases. The Department did not document justification for the inventory discrepancies. OSA selected a non-statistical random sample. OSA performed a physical inventory inspection of all items that remained in inventory on the inspection date and identified that discrepancies existed between the system inventory items and the physical items on hand for 37 of the 41 food items tested. The Department did not document justification for the inventory discrepancies. Context: In fiscal year 2023, the Department distributed approximately $8.5 million of USDA donated foods to SFAs. Cause: Lack of oversight to ensure that: • the newly implemented inventory system is properly configured; and • review, remediation and justification of inventory discrepancies is documented Effect: • Noncompliance with Federal regulations • Inaccurate reporting of noncash Federal awards on the Schedule of Expenditures of Federal Awards • Theft, loss, or damage of inventory may go undetected. Recommendation: We recommend that the Department: • review the configuration of the inventory system to remediate variances, • regularly reconcile system inventory records to physical inventory counts, and • document the justification of any inventory discrepancies. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. The error was found to be a ticketing issue in CNPWeb, and a ticket was issued to remediate the problem. Staff will continue to provide paper back-up until the computer system is found to be reliable. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-05)
(2023-043) Title: Internal control over CNC subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 7 CFR 210.18; 7 CFR 225.7; U.S. Department of Agriculture Policy Memo SP 46-2015 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. The Department must conduct administrative reviews of School Food Authorities (SFAs) participating in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). These procedures must also be followed, as applicable, to conduct administrative reviews of the afterschool snacks, Special Milk Program (SMP) and the Fresh Fruit and Vegetable Program (FFVP). The Department must review sponsors to ensure compliance with Summer Food Service Program (SFSP) regulations. The Department is required to conduct a review of base year certification and benefit issuance documentation for any SFA requesting approval to participate in NSLP or SBP using U.S. Department of Agriculture (USDA) Special Provision 2, which is a provision established to reduce application burdens and simplify claim procedures. The review must occur at some point during the base year. If errors are identified as a result of the review, the Department must adjust all of the SFA’s closed claims that occurred in the current school year. Condition: The Child Nutrition Cluster (CNC) includes the NSLP, SBP, SMP for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE partners with local SFAs to provide benefits to school-aged children. DOE has assigned subrecipient monitoring responsibilities, which include administrative reviews and other reviews as needed, to the Child Nutrition Services (CNS) division. Administrative reviews of all SFAs are required at least once every five years. CNS utilizes a spreadsheet to track and facilitate the reviews and a USDA questionnaire to document the completion of the review. CNS is required to retain documentation to support all elements of the administrative reviews and to demonstrate the SFA’s compliance with the program. The Office of the State Auditor (OSA) tested 15 NSLP and SFSP administrative reviews and found: • the review tracking spreadsheet was not fully completed for two reviews; • questionnaires were not fully completed for three reviews; and • information on the USDA questionnaire was inaccurate for four reviews. Therefore, documentation does not support that all required areas were reviewed in accordance with Federal regulations; however, the Final Review Report issued and corrective action taken suggests that a full onsite review was completed. OSA selected a non-statistical random sample. In addition, CNS must perform reviews for all SFAs that have applied to participate in USDA Special Provision 2. These base reviews provide the required information necessary to determine the level of claims the SFA may submit in the subsequent year. After completion of the base year review, a letter detailing the results, including any adjustments to previously submitted claims, is provided to the SFA. The SFA is required to adjust claims and enrollment data through the claim revision process and CNS is responsible for verifying that the appropriate revisions have been completed. In fiscal year 2023, CNS identified 99 SFAs that required a base year review. OSA tested 15 base year reviews and identified nine SFAs that did not properly revise claims, and CNS did not verify that the appropriate revisions had been completed. OSA selected a non-statistical random sample. Context: In fiscal year 2023, CNC expenditures totaled approximately $79 million, of which approximately $69 million was provided to 247 SFAs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be complying with Federal statues, regulations, or the terms and conditions of the subaward. • Potential questioned costs and disallowances. Base year reviews provide authorization for the level of allowable claims the SFA can claim in subsequent periods. Without a base year review and necessary revisions, SFAs could be underclaiming or overclaiming costs. Recommendation: We recommend that the Department implement policies and procedures and increase oversight to ensure that: • reviews are completed as required and supporting documentation is retained; • SFAs revise claims appropriately after a base year review; and • CNS verifies that claim adjustments occur as necessary. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. Policies and procedures will be implemented, and training will be provided to ensure that reviews are completed and documentation is retained, SFA claims are revised appropriately, and verifications of claim adjustments occur as necessary. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 (State Number: 23-1203-03)
(2023-037) Title: Internal control over CNC special reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 170 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Agencies must report each subaward that equals or exceeds the first-tier subaward threshold of $30,000 in Federal funds in the public-facing Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Condition: When an amount exceeding the first-tier subaward threshold is awarded to a subrecipient, the Department must collect and enter data into FSRS. The Department did not report any of its first-tier subawards under the Child Nutrition Cluster (CNC) in FSRS for fiscal year 2023. Context: In fiscal year 2023, the Department was required to report first-tier subawards totaling approximately $70 million under CNC. First-tier subawards account for 88 percent of the program’s fiscal year 2023 expenditures. Cause: Lack of policies and procedures Effect: • Noncompliance with Federal regulations • First-tier subaward information for CNC was not reported to the Federal government. This information may be used for programmatic, policy, or statistical purposes. Recommendation: The Department developed and implemented policies and procedures beginning July 1, 2023; therefore, we recommend that the Department monitor these newly established policies and procedures to ensure that they have been properly implemented. This will ensure subawards meeting or exceeding the first-tier threshold are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The existing procedure for monitoring FFATA reporting now includes Child Nutrition Awards as of 7/1/23. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1203-01)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-041) Title: Internal control over the submission of CNC Schedule of Expenditures of Federal Awards information needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.502 and .510; 7 CFR 250.58(e); U.S. Department of Agriculture Policy No. FD-104 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended, including distribution or use of food commodities. Federal non-cash assistance, such as food commodities must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. For a cluster of programs, the SEFA must list individual Federal programs within the cluster. In meeting the commodity offer value of donated foods for the school food authority, the distributing agency must use the cost-per-pound donated food price posted annually by the U.S. Department of Agriculture (USDA), the most recently published cost-per-pound price in the USDA donated foods catalog, and/or a rolling average of the USDA prices. Each distributing or recipient agency must choose a method of valuing USDA donated foods for audit purposes. In most cases, it is recommended that a distributing or recipient agency use one of the options listed in 7 CFR 250.58(e). Once a method of assigning value to USDA donated foods is selected, it must be used consistently in all its audit activities and the State must maintain a record of the means of valuing donated foods for such purposes. Condition: The Department must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Department submitted exhibits to OSC that: • incorrectly excluded $2.4 million of fresh food distributed to subrecipients and additional commodity items received. • incorrectly reported $1,417 of expenditures under ALN 10.555 National School Lunch Program that should have been reported under ALN 10.556 Special Milk Program. Context: In fiscal year 2023, noncash assistance totaling $2.4 million was not reported to OSC by the Department for inclusion on the SEFA. Noncash assistance for the Child Nutrition Cluster totaled $8.5 million in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Inaccurate reporting of expenditure amounts on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department implement policies and procedures that: • outline the method of valuing USDA donated foods in accordance with Federal regulations. • require a comprehensive review of SEFA schedules prior to submission to OSC. In addition, we recommend enhanced oversight over policies and procedures to ensure they are consistently applied and the SEFA is accurate and complete. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The child nutrition department will create a procedure for reporting the SEFA numbers to DOE Finance. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-02)
(2023-042) Title: Internal control over CNC donated food inventory needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 250.12 and .19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. On an annual basis, the distributing agency must conduct a physical review of donated food inventories at all storage facilities used by the distributing agency and must reconcile physical and book inventories of donated foods. The distributing agency must ensure that a separate inventory record of donated foods is maintained. The distributing agency’s system of inventory management must ensure that donated foods are distributed in a timely manner and in optimal condition. Condition: The Child Nutrition Cluster includes the School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children, and the Fresh Fruit and Vegetable Program. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs, to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools, and to encourage consumption of nutritious agriculture commodities. The Department receives donated foods from the U.S. Department of Agriculture (USDA) for distribution to School Food Authorities (SFAs). In fiscal year 2022, the Department implemented a new inventory system for tracking donated foods. The Office of the State Auditor (OSA) tested 10 donated food items to ensure that the Department had properly tracked the items. OSA reviewed USDA food requests, inventory receipts, and distributions made to SFAs to verify that the documentation corresponded to information in the inventory system and physical inventory counts. OSA identified the following two instances where the records did not agree: • For one food item, system inventory records identified 52 cases more than OSA calculated, and the physical inventory count indicated 41 cases less than the system inventory records. • For the other food item, system inventory records identified nine cases less than OSA calculated, and the physical inventory count indicated 17 cases more than the system inventory records. In addition, for nine of the food items tested, system inventory records did not align with the physical inventory count; variances ranged from 2 to 41 cases. The Department did not document justification for the inventory discrepancies. OSA selected a non-statistical random sample. OSA performed a physical inventory inspection of all items that remained in inventory on the inspection date and identified that discrepancies existed between the system inventory items and the physical items on hand for 37 of the 41 food items tested. The Department did not document justification for the inventory discrepancies. Context: In fiscal year 2023, the Department distributed approximately $8.5 million of USDA donated foods to SFAs. Cause: Lack of oversight to ensure that: • the newly implemented inventory system is properly configured; and • review, remediation and justification of inventory discrepancies is documented Effect: • Noncompliance with Federal regulations • Inaccurate reporting of noncash Federal awards on the Schedule of Expenditures of Federal Awards • Theft, loss, or damage of inventory may go undetected. Recommendation: We recommend that the Department: • review the configuration of the inventory system to remediate variances, • regularly reconcile system inventory records to physical inventory counts, and • document the justification of any inventory discrepancies. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. The error was found to be a ticketing issue in CNPWeb, and a ticket was issued to remediate the problem. Staff will continue to provide paper back-up until the computer system is found to be reliable. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-05)
(2023-043) Title: Internal control over CNC subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 7 CFR 210.18; 7 CFR 225.7; U.S. Department of Agriculture Policy Memo SP 46-2015 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. The Department must conduct administrative reviews of School Food Authorities (SFAs) participating in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). These procedures must also be followed, as applicable, to conduct administrative reviews of the afterschool snacks, Special Milk Program (SMP) and the Fresh Fruit and Vegetable Program (FFVP). The Department must review sponsors to ensure compliance with Summer Food Service Program (SFSP) regulations. The Department is required to conduct a review of base year certification and benefit issuance documentation for any SFA requesting approval to participate in NSLP or SBP using U.S. Department of Agriculture (USDA) Special Provision 2, which is a provision established to reduce application burdens and simplify claim procedures. The review must occur at some point during the base year. If errors are identified as a result of the review, the Department must adjust all of the SFA’s closed claims that occurred in the current school year. Condition: The Child Nutrition Cluster (CNC) includes the NSLP, SBP, SMP for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE partners with local SFAs to provide benefits to school-aged children. DOE has assigned subrecipient monitoring responsibilities, which include administrative reviews and other reviews as needed, to the Child Nutrition Services (CNS) division. Administrative reviews of all SFAs are required at least once every five years. CNS utilizes a spreadsheet to track and facilitate the reviews and a USDA questionnaire to document the completion of the review. CNS is required to retain documentation to support all elements of the administrative reviews and to demonstrate the SFA’s compliance with the program. The Office of the State Auditor (OSA) tested 15 NSLP and SFSP administrative reviews and found: • the review tracking spreadsheet was not fully completed for two reviews; • questionnaires were not fully completed for three reviews; and • information on the USDA questionnaire was inaccurate for four reviews. Therefore, documentation does not support that all required areas were reviewed in accordance with Federal regulations; however, the Final Review Report issued and corrective action taken suggests that a full onsite review was completed. OSA selected a non-statistical random sample. In addition, CNS must perform reviews for all SFAs that have applied to participate in USDA Special Provision 2. These base reviews provide the required information necessary to determine the level of claims the SFA may submit in the subsequent year. After completion of the base year review, a letter detailing the results, including any adjustments to previously submitted claims, is provided to the SFA. The SFA is required to adjust claims and enrollment data through the claim revision process and CNS is responsible for verifying that the appropriate revisions have been completed. In fiscal year 2023, CNS identified 99 SFAs that required a base year review. OSA tested 15 base year reviews and identified nine SFAs that did not properly revise claims, and CNS did not verify that the appropriate revisions had been completed. OSA selected a non-statistical random sample. Context: In fiscal year 2023, CNC expenditures totaled approximately $79 million, of which approximately $69 million was provided to 247 SFAs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be complying with Federal statues, regulations, or the terms and conditions of the subaward. • Potential questioned costs and disallowances. Base year reviews provide authorization for the level of allowable claims the SFA can claim in subsequent periods. Without a base year review and necessary revisions, SFAs could be underclaiming or overclaiming costs. Recommendation: We recommend that the Department implement policies and procedures and increase oversight to ensure that: • reviews are completed as required and supporting documentation is retained; • SFAs revise claims appropriately after a base year review; and • CNS verifies that claim adjustments occur as necessary. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. Policies and procedures will be implemented, and training will be provided to ensure that reviews are completed and documentation is retained, SFA claims are revised appropriately, and verifications of claim adjustments occur as necessary. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 (State Number: 23-1203-03)
(2023-037) Title: Internal control over CNC special reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 170 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Agencies must report each subaward that equals or exceeds the first-tier subaward threshold of $30,000 in Federal funds in the public-facing Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Condition: When an amount exceeding the first-tier subaward threshold is awarded to a subrecipient, the Department must collect and enter data into FSRS. The Department did not report any of its first-tier subawards under the Child Nutrition Cluster (CNC) in FSRS for fiscal year 2023. Context: In fiscal year 2023, the Department was required to report first-tier subawards totaling approximately $70 million under CNC. First-tier subawards account for 88 percent of the program’s fiscal year 2023 expenditures. Cause: Lack of policies and procedures Effect: • Noncompliance with Federal regulations • First-tier subaward information for CNC was not reported to the Federal government. This information may be used for programmatic, policy, or statistical purposes. Recommendation: The Department developed and implemented policies and procedures beginning July 1, 2023; therefore, we recommend that the Department monitor these newly established policies and procedures to ensure that they have been properly implemented. This will ensure subawards meeting or exceeding the first-tier threshold are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The existing procedure for monitoring FFATA reporting now includes Child Nutrition Awards as of 7/1/23. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1203-01)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-041) Title: Internal control over the submission of CNC Schedule of Expenditures of Federal Awards information needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.502 and .510; 7 CFR 250.58(e); U.S. Department of Agriculture Policy No. FD-104 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended, including distribution or use of food commodities. Federal non-cash assistance, such as food commodities must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. For a cluster of programs, the SEFA must list individual Federal programs within the cluster. In meeting the commodity offer value of donated foods for the school food authority, the distributing agency must use the cost-per-pound donated food price posted annually by the U.S. Department of Agriculture (USDA), the most recently published cost-per-pound price in the USDA donated foods catalog, and/or a rolling average of the USDA prices. Each distributing or recipient agency must choose a method of valuing USDA donated foods for audit purposes. In most cases, it is recommended that a distributing or recipient agency use one of the options listed in 7 CFR 250.58(e). Once a method of assigning value to USDA donated foods is selected, it must be used consistently in all its audit activities and the State must maintain a record of the means of valuing donated foods for such purposes. Condition: The Department must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Department submitted exhibits to OSC that: • incorrectly excluded $2.4 million of fresh food distributed to subrecipients and additional commodity items received. • incorrectly reported $1,417 of expenditures under ALN 10.555 National School Lunch Program that should have been reported under ALN 10.556 Special Milk Program. Context: In fiscal year 2023, noncash assistance totaling $2.4 million was not reported to OSC by the Department for inclusion on the SEFA. Noncash assistance for the Child Nutrition Cluster totaled $8.5 million in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Inaccurate reporting of expenditure amounts on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department implement policies and procedures that: • outline the method of valuing USDA donated foods in accordance with Federal regulations. • require a comprehensive review of SEFA schedules prior to submission to OSC. In addition, we recommend enhanced oversight over policies and procedures to ensure they are consistently applied and the SEFA is accurate and complete. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The child nutrition department will create a procedure for reporting the SEFA numbers to DOE Finance. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-02)
(2023-042) Title: Internal control over CNC donated food inventory needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 250.12 and .19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. On an annual basis, the distributing agency must conduct a physical review of donated food inventories at all storage facilities used by the distributing agency and must reconcile physical and book inventories of donated foods. The distributing agency must ensure that a separate inventory record of donated foods is maintained. The distributing agency’s system of inventory management must ensure that donated foods are distributed in a timely manner and in optimal condition. Condition: The Child Nutrition Cluster includes the School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children, and the Fresh Fruit and Vegetable Program. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs, to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools, and to encourage consumption of nutritious agriculture commodities. The Department receives donated foods from the U.S. Department of Agriculture (USDA) for distribution to School Food Authorities (SFAs). In fiscal year 2022, the Department implemented a new inventory system for tracking donated foods. The Office of the State Auditor (OSA) tested 10 donated food items to ensure that the Department had properly tracked the items. OSA reviewed USDA food requests, inventory receipts, and distributions made to SFAs to verify that the documentation corresponded to information in the inventory system and physical inventory counts. OSA identified the following two instances where the records did not agree: • For one food item, system inventory records identified 52 cases more than OSA calculated, and the physical inventory count indicated 41 cases less than the system inventory records. • For the other food item, system inventory records identified nine cases less than OSA calculated, and the physical inventory count indicated 17 cases more than the system inventory records. In addition, for nine of the food items tested, system inventory records did not align with the physical inventory count; variances ranged from 2 to 41 cases. The Department did not document justification for the inventory discrepancies. OSA selected a non-statistical random sample. OSA performed a physical inventory inspection of all items that remained in inventory on the inspection date and identified that discrepancies existed between the system inventory items and the physical items on hand for 37 of the 41 food items tested. The Department did not document justification for the inventory discrepancies. Context: In fiscal year 2023, the Department distributed approximately $8.5 million of USDA donated foods to SFAs. Cause: Lack of oversight to ensure that: • the newly implemented inventory system is properly configured; and • review, remediation and justification of inventory discrepancies is documented Effect: • Noncompliance with Federal regulations • Inaccurate reporting of noncash Federal awards on the Schedule of Expenditures of Federal Awards • Theft, loss, or damage of inventory may go undetected. Recommendation: We recommend that the Department: • review the configuration of the inventory system to remediate variances, • regularly reconcile system inventory records to physical inventory counts, and • document the justification of any inventory discrepancies. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. The error was found to be a ticketing issue in CNPWeb, and a ticket was issued to remediate the problem. Staff will continue to provide paper back-up until the computer system is found to be reliable. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-05)
(2023-043) Title: Internal control over CNC subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 7 CFR 210.18; 7 CFR 225.7; U.S. Department of Agriculture Policy Memo SP 46-2015 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. The Department must conduct administrative reviews of School Food Authorities (SFAs) participating in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). These procedures must also be followed, as applicable, to conduct administrative reviews of the afterschool snacks, Special Milk Program (SMP) and the Fresh Fruit and Vegetable Program (FFVP). The Department must review sponsors to ensure compliance with Summer Food Service Program (SFSP) regulations. The Department is required to conduct a review of base year certification and benefit issuance documentation for any SFA requesting approval to participate in NSLP or SBP using U.S. Department of Agriculture (USDA) Special Provision 2, which is a provision established to reduce application burdens and simplify claim procedures. The review must occur at some point during the base year. If errors are identified as a result of the review, the Department must adjust all of the SFA’s closed claims that occurred in the current school year. Condition: The Child Nutrition Cluster (CNC) includes the NSLP, SBP, SMP for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE partners with local SFAs to provide benefits to school-aged children. DOE has assigned subrecipient monitoring responsibilities, which include administrative reviews and other reviews as needed, to the Child Nutrition Services (CNS) division. Administrative reviews of all SFAs are required at least once every five years. CNS utilizes a spreadsheet to track and facilitate the reviews and a USDA questionnaire to document the completion of the review. CNS is required to retain documentation to support all elements of the administrative reviews and to demonstrate the SFA’s compliance with the program. The Office of the State Auditor (OSA) tested 15 NSLP and SFSP administrative reviews and found: • the review tracking spreadsheet was not fully completed for two reviews; • questionnaires were not fully completed for three reviews; and • information on the USDA questionnaire was inaccurate for four reviews. Therefore, documentation does not support that all required areas were reviewed in accordance with Federal regulations; however, the Final Review Report issued and corrective action taken suggests that a full onsite review was completed. OSA selected a non-statistical random sample. In addition, CNS must perform reviews for all SFAs that have applied to participate in USDA Special Provision 2. These base reviews provide the required information necessary to determine the level of claims the SFA may submit in the subsequent year. After completion of the base year review, a letter detailing the results, including any adjustments to previously submitted claims, is provided to the SFA. The SFA is required to adjust claims and enrollment data through the claim revision process and CNS is responsible for verifying that the appropriate revisions have been completed. In fiscal year 2023, CNS identified 99 SFAs that required a base year review. OSA tested 15 base year reviews and identified nine SFAs that did not properly revise claims, and CNS did not verify that the appropriate revisions had been completed. OSA selected a non-statistical random sample. Context: In fiscal year 2023, CNC expenditures totaled approximately $79 million, of which approximately $69 million was provided to 247 SFAs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be complying with Federal statues, regulations, or the terms and conditions of the subaward. • Potential questioned costs and disallowances. Base year reviews provide authorization for the level of allowable claims the SFA can claim in subsequent periods. Without a base year review and necessary revisions, SFAs could be underclaiming or overclaiming costs. Recommendation: We recommend that the Department implement policies and procedures and increase oversight to ensure that: • reviews are completed as required and supporting documentation is retained; • SFAs revise claims appropriately after a base year review; and • CNS verifies that claim adjustments occur as necessary. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. Policies and procedures will be implemented, and training will be provided to ensure that reviews are completed and documentation is retained, SFA claims are revised appropriately, and verifications of claim adjustments occur as necessary. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 (State Number: 23-1203-03)
(2023-044) Title: Internal control over WIC subrecipient monitoring needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Manie Center for Disease Control & Prevention Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 246.19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department shall establish an ongoing management evaluation system which includes the monitoring of local agency operations, the review of local agency financial and participation reports, the development of corrective action plans to resolve program deficiencies, the monitoring of implementation of the corrective action plans, and on-site visits. The results of such actions must be documented. Monitoring of local agencies must encompass evaluation of management, certification, nutrition education, breastfeeding promotion and support, participant services, civil rights compliance, accountability, financial management systems, and food delivery systems. The Department must conduct monitoring reviews of each local agency at least once every two years. Monitoring must include on-site reviews of a minimum of 20 percent of the clinics in each local agency, or one clinic, whichever is greater. Condition: The State contracts with eight local agencies to administer the WIC program. The Department is required to perform management evaluation reviews (MERs) for each of the eight local agencies at least once every two years. MERs must include all components identified in 7 CFR 246.19. Performing ongoing monitoring activities ensures that the local agency is using funds for authorized purposes and in compliance with Federal regulations. Since the Department had not completed the financial management system portion of the review for any of the local agencies in the previous year, the Office of the State Auditor (OSA) selected the eight local agencies for review and found that evaluation of the financial management systems portion of the MERs remained outstanding for all local agencies. OSA then reviewed the other components of the MER separately and identified four local agencies that were due for completion in fiscal year 2023 and found: • one MER originally due in November 2021 was performed in August 2022. • one MER due in April 2023 was performed in May 2023. • one MER due in May 2023 was not performed during the fiscal year. Context: The Department provided approximately $6 million in WIC program funds to eight local agencies in fiscal year 2023. Cause: Lack of resources Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. Recommendation: We recommend that the Department review its staffing needs and allocate resources to ensure MERs are completed in a timely manner. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. WIC completed three (3) MERs for FY23. One (1) MER was not completed within the fiscal year, however, has since been completed. WIC is now current with the MERs in this fiscal year. WIC continues to work with DHHS Internal Audit to assist in completing the MERs financial component. All Local Agencies were monitored for FY23. Contact: Ginger Roberts-Scott, Senior Health Program Manager, DHHS, 207-287-5342 (State Number: 23-1113-02)
(2023-044) Title: Internal control over WIC subrecipient monitoring needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Manie Center for Disease Control & Prevention Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 246.19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department shall establish an ongoing management evaluation system which includes the monitoring of local agency operations, the review of local agency financial and participation reports, the development of corrective action plans to resolve program deficiencies, the monitoring of implementation of the corrective action plans, and on-site visits. The results of such actions must be documented. Monitoring of local agencies must encompass evaluation of management, certification, nutrition education, breastfeeding promotion and support, participant services, civil rights compliance, accountability, financial management systems, and food delivery systems. The Department must conduct monitoring reviews of each local agency at least once every two years. Monitoring must include on-site reviews of a minimum of 20 percent of the clinics in each local agency, or one clinic, whichever is greater. Condition: The State contracts with eight local agencies to administer the WIC program. The Department is required to perform management evaluation reviews (MERs) for each of the eight local agencies at least once every two years. MERs must include all components identified in 7 CFR 246.19. Performing ongoing monitoring activities ensures that the local agency is using funds for authorized purposes and in compliance with Federal regulations. Since the Department had not completed the financial management system portion of the review for any of the local agencies in the previous year, the Office of the State Auditor (OSA) selected the eight local agencies for review and found that evaluation of the financial management systems portion of the MERs remained outstanding for all local agencies. OSA then reviewed the other components of the MER separately and identified four local agencies that were due for completion in fiscal year 2023 and found: • one MER originally due in November 2021 was performed in August 2022. • one MER due in April 2023 was performed in May 2023. • one MER due in May 2023 was not performed during the fiscal year. Context: The Department provided approximately $6 million in WIC program funds to eight local agencies in fiscal year 2023. Cause: Lack of resources Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. Recommendation: We recommend that the Department review its staffing needs and allocate resources to ensure MERs are completed in a timely manner. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. WIC completed three (3) MERs for FY23. One (1) MER was not completed within the fiscal year, however, has since been completed. WIC is now current with the MERs in this fiscal year. WIC continues to work with DHHS Internal Audit to assist in completing the MERs financial component. All Local Agencies were monitored for FY23. Contact: Ginger Roberts-Scott, Senior Health Program Manager, DHHS, 207-287-5342 (State Number: 23-1113-02)
(2023-045) Title: Internal control over WIC cash balances needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services Administrative and Financial Services State Bureau: Maine Center for Disease Control & Prevention Health and Human Services Service Center Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Cash management Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and terms and conditions of the awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and other assets related to the Federally-funded activities. Condition: The Office of the State Auditor (OSA) issued finding 2019-021 as a result of procedures performed for the fiscal year 2019 audit. This finding identified that “Program personnel did not take the existing cash balance into consideration when requesting Federal funds for the Food portion of the WIC grant.” This resulted in an excess cash balance for the Food grant. The finding was repeated as finding 2020-021 for the fiscal year 2020 audit, finding 2021-018 for the fiscal year 2021 audit, and finding 2022-040 for the fiscal year 2022 audit. In response to these findings, the Department performed a reconciliation of all prior grant awards to determine the cause of the excess cash balance. This reconciliation identified a $1,059,186 discrepancy between the State’s accounting system, WIC reporting, and Federal draws from the 2013 and 2018 WIC Food grants. Context: The Department calculated a $1,055,088 residual cash balance from the 2013 WIC Food grant and a $4,098 residual cash balance from the 2018 WIC Food grant. Cause: Lack of adequate recordkeeping and account reconciliation in prior years Effect: The State may be required to return $1,059,186 to the Federal awarding agency. Recommendation: We recommend that the Department contact the Federal awarding agency to resolve this matter. Corrective Action Plan: See F-23 Management’s Response: The DHHS and DHHS Financial Service Center agree with this finding. The Department will work with the Federal Agency on steps needed to resolve the cash discrepancy. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1113-01)
(2023-045) Title: Internal control over WIC cash balances needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services Administrative and Financial Services State Bureau: Maine Center for Disease Control & Prevention Health and Human Services Service Center Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Assistance Listing Number: 10.557 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Cash management Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and terms and conditions of the awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and other assets related to the Federally-funded activities. Condition: The Office of the State Auditor (OSA) issued finding 2019-021 as a result of procedures performed for the fiscal year 2019 audit. This finding identified that “Program personnel did not take the existing cash balance into consideration when requesting Federal funds for the Food portion of the WIC grant.” This resulted in an excess cash balance for the Food grant. The finding was repeated as finding 2020-021 for the fiscal year 2020 audit, finding 2021-018 for the fiscal year 2021 audit, and finding 2022-040 for the fiscal year 2022 audit. In response to these findings, the Department performed a reconciliation of all prior grant awards to determine the cause of the excess cash balance. This reconciliation identified a $1,059,186 discrepancy between the State’s accounting system, WIC reporting, and Federal draws from the 2013 and 2018 WIC Food grants. Context: The Department calculated a $1,055,088 residual cash balance from the 2013 WIC Food grant and a $4,098 residual cash balance from the 2018 WIC Food grant. Cause: Lack of adequate recordkeeping and account reconciliation in prior years Effect: The State may be required to return $1,059,186 to the Federal awarding agency. Recommendation: We recommend that the Department contact the Federal awarding agency to resolve this matter. Corrective Action Plan: See F-23 Management’s Response: The DHHS and DHHS Financial Service Center agree with this finding. The Department will work with the Federal Agency on steps needed to resolve the cash discrepancy. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1113-01)
(2023-077) Title: Internal control over subrecipient cash management needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Division of Audit Division of Contract Management Federal Agency: U.S. Department of Agriculture U.S. Department of Health and Human Services Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Immunization Cooperative Agreements (COVID-19) Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 10.557; 93.268; 93.558 Federal Award Identification Number: See E-93 to E-94, E-94 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Department’s Division of Contract Management (DCM) has three methods for providing payments to subrecipients: cost-settled, cost-settled by invoice, and fee-for-service subawards. Cash management requirements are not applicable for fee-for-service subawards. For cost-settled subawards, DCM procedures include making equal advance monthly payments and then reconciling those amounts to the quarterly financial reports submitted by the subrecipient. This procedure does not take into consideration the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and therefore is not in compliance with subrecipient cash management requirements. For “cost-settled by invoice” (reimbursement) subawards, DCM procedures do not require subrecipients to include supporting documentation with monthly requests for reimbursement. As a result, DCM does not have assurance whether payments are for reimbursement or advances. During fiscal year 2023, the Department’s Division of Audit (DOA) performed testing over a sample of payments made to 37 subrecipients deemed high risk by the Department; payments were reviewed for compliance with cash management and allowability requirements. The Office of the State Auditor reviewed DOA’s testing and identified: • eight subrecipients where testing was not completed; therefore, compliance with cash management requirements was not determined. • eight subrecipients where documentation to support cash management testing performed could not be provided. As a result, compliance with subrecipient cash management requirements could not be substantiated. • 13 subrecipients were noted as noncompliant with cash management requirements by DOA; however, corrective action plans have not been established for any of the 13 subrecipients. Therefore, as evidenced above, the Department is not in compliance with subrecipient cash management requirements. Context: In fiscal year 2023, the Department provided: • $31.7 million to subrecipients from TANF grant funds of $91.8 million. TANF’s subawards are either cost-settled, cost-settled by invoice, or fee-for-service. • $6 million to subrecipients from WIC grant funds of $22.4 million. All of WIC’s subawards are cost-settled. • $2.7 million to subrecipients from Immunization Cooperative Agreements grant funds of $24.5 million. Immunization Cooperative Agreement’s subawards are either cost-settled or cost-settled by invoice. Cause: • Lack of adequate subrecipient monitoring procedures • Misinterpretation of Federal regulations Effect: • Noncompliance with subrecipient cash management requirements • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that the Department enhance monitoring procedures to ensure that: • the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for cost-settled subawards. • the payment of Federal funds to the subrecipient is for reimbursement purposes, and not for advance payment, for “cost-settled by invoice” subawards. • corrective action plans are established for subrecipients where noncompliance has been identified. Corrective Action Plan: See F-32 Management’s Response: The Department disagrees with this finding. The Department believes that we are in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement is as close as administratively feasible. The Department’s procedures related to cash management include: reconciling payments to expenditures quarterly and monitoring subrecipient’s audits. The Department’s subrecipients not only are required to have Single Audits but also are required to have audited financial statements and audited Schedule of Expenditures of Department Awards at a lower threshold than that of the Single Audit through the Department’s rule, Maine Uniform Accounting and Auditing Practices for Community Agencies (MAAP). This rule also defines a major program at a much lower threshold than the Uniform Guidance, so far more programs get tested annually than just Single Audits alone. Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: The subrecipient monitoring procedures outlined in Management’s Response do not ensure that subrecipients are drawing funds in accordance with Federal cash management requirements, as follows: • The Department does not obtain documentation to support the timing of the subrecipient’s expenditures reported on the quarterly expense reports and to substantiate compliance. • Though reviewing the subrecipient’s MAAP audits and Single Audits for findings is beneficial: o monitoring procedures must be performed during the award period; however, MAAP and Single Audits are completed towards the end or after the grant award period. o MAAP audit requirements do not require testing of all subawards. Therefore, the subrecipient’s cash management may or may not be tested by the subrecipient’s auditor. o it is not guaranteed that cash management will be selected for testing by the subrecipient’s auditor; therefore, relying on the subrecipient’s auditor to discover cash management issues is not an adequate procedure to monitor the subrecipient’s compliance with that requirement. Additionally, Management’s Response does not address specific issues identified by OSA cited in the Condition above. Therefore, the Department was noncompliant with Federal regulation 2 CFR 200.305 that requires monitoring cash drawdowns of subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual cash disbursement for program purposes is minimized. The finding remains as stated. (State Number: 23-1111-04)
(2023-077) Title: Internal control over subrecipient cash management needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Division of Audit Division of Contract Management Federal Agency: U.S. Department of Agriculture U.S. Department of Health and Human Services Assistance Listing Title: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (COVID-19) Immunization Cooperative Agreements (COVID-19) Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 10.557; 93.268; 93.558 Federal Award Identification Number: See E-93 to E-94, E-94 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Department’s Division of Contract Management (DCM) has three methods for providing payments to subrecipients: cost-settled, cost-settled by invoice, and fee-for-service subawards. Cash management requirements are not applicable for fee-for-service subawards. For cost-settled subawards, DCM procedures include making equal advance monthly payments and then reconciling those amounts to the quarterly financial reports submitted by the subrecipient. This procedure does not take into consideration the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and therefore is not in compliance with subrecipient cash management requirements. For “cost-settled by invoice” (reimbursement) subawards, DCM procedures do not require subrecipients to include supporting documentation with monthly requests for reimbursement. As a result, DCM does not have assurance whether payments are for reimbursement or advances. During fiscal year 2023, the Department’s Division of Audit (DOA) performed testing over a sample of payments made to 37 subrecipients deemed high risk by the Department; payments were reviewed for compliance with cash management and allowability requirements. The Office of the State Auditor reviewed DOA’s testing and identified: • eight subrecipients where testing was not completed; therefore, compliance with cash management requirements was not determined. • eight subrecipients where documentation to support cash management testing performed could not be provided. As a result, compliance with subrecipient cash management requirements could not be substantiated. • 13 subrecipients were noted as noncompliant with cash management requirements by DOA; however, corrective action plans have not been established for any of the 13 subrecipients. Therefore, as evidenced above, the Department is not in compliance with subrecipient cash management requirements. Context: In fiscal year 2023, the Department provided: • $31.7 million to subrecipients from TANF grant funds of $91.8 million. TANF’s subawards are either cost-settled, cost-settled by invoice, or fee-for-service. • $6 million to subrecipients from WIC grant funds of $22.4 million. All of WIC’s subawards are cost-settled. • $2.7 million to subrecipients from Immunization Cooperative Agreements grant funds of $24.5 million. Immunization Cooperative Agreement’s subawards are either cost-settled or cost-settled by invoice. Cause: • Lack of adequate subrecipient monitoring procedures • Misinterpretation of Federal regulations Effect: • Noncompliance with subrecipient cash management requirements • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that the Department enhance monitoring procedures to ensure that: • the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for cost-settled subawards. • the payment of Federal funds to the subrecipient is for reimbursement purposes, and not for advance payment, for “cost-settled by invoice” subawards. • corrective action plans are established for subrecipients where noncompliance has been identified. Corrective Action Plan: See F-32 Management’s Response: The Department disagrees with this finding. The Department believes that we are in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement is as close as administratively feasible. The Department’s procedures related to cash management include: reconciling payments to expenditures quarterly and monitoring subrecipient’s audits. The Department’s subrecipients not only are required to have Single Audits but also are required to have audited financial statements and audited Schedule of Expenditures of Department Awards at a lower threshold than that of the Single Audit through the Department’s rule, Maine Uniform Accounting and Auditing Practices for Community Agencies (MAAP). This rule also defines a major program at a much lower threshold than the Uniform Guidance, so far more programs get tested annually than just Single Audits alone. Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: The subrecipient monitoring procedures outlined in Management’s Response do not ensure that subrecipients are drawing funds in accordance with Federal cash management requirements, as follows: • The Department does not obtain documentation to support the timing of the subrecipient’s expenditures reported on the quarterly expense reports and to substantiate compliance. • Though reviewing the subrecipient’s MAAP audits and Single Audits for findings is beneficial: o monitoring procedures must be performed during the award period; however, MAAP and Single Audits are completed towards the end or after the grant award period. o MAAP audit requirements do not require testing of all subawards. Therefore, the subrecipient’s cash management may or may not be tested by the subrecipient’s auditor. o it is not guaranteed that cash management will be selected for testing by the subrecipient’s auditor; therefore, relying on the subrecipient’s auditor to discover cash management issues is not an adequate procedure to monitor the subrecipient’s compliance with that requirement. Additionally, Management’s Response does not address specific issues identified by OSA cited in the Condition above. Therefore, the Department was noncompliant with Federal regulation 2 CFR 200.305 that requires monitoring cash drawdowns of subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual cash disbursement for program purposes is minimized. The finding remains as stated. (State Number: 23-1111-04)
(2023-046) Title: Internal control over CACFP eligibility determination and claim reimbursement procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child and Adult Care Food Program (CACFP) Assistance Listing Number: 10.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $19,362 Likely Questioned Costs: Undeterminable; due to the variety of institution types in the test population and varied meal claim counts, the projection of questioned costs utilizing the error rate related to the known exceptions would not provide a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 226; Child and Adult Care Food Program Memorandum #1-94 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Day care homes (DCHs) are defined as an organized nonresidential childcare program for children enrolled in a private home, licensed or approved as a family or group DCH and under the auspices of a Sponsoring Organization (SO). Each State agency shall establish procedures for institutions to properly submit claims for reimbursement (CFRs). Such procedures must include State agency edit checks, including but not limited to ensuring that payments are made only for approved meal types and that the number of meals for which reimbursement is provided does not exceed the product of the total enrollment, operating days, and approved meal types. The CFR must report information in accordance with the financial management system established by the State agency, and in sufficient detail to justify the reimbursement claimed. In submitting a CFR, each institution must certify that the claim is correct and that records are available to support that claim. Prior to submitting its consolidated monthly claim to the State agency, each SO must conduct reasonable edit checks on the sponsored centers’ meal claims. Each SO shall accept final administrative and financial responsibility for food service operations in all facilities under its jurisdiction. Reimbursement may not be claimed for meals served to children who are not enrolled, or for meals served at any one time to children in excess of the home’s authorized capacity. Child and Adult Care Food Program (CACFP) Memorandum #1-94 states that CACFP regulations define a DCH as a private residence, and that commercial properties including churches and schools are not private residences and are not eligible to participate in CACFP as a family DCH. Condition: CACFP provides nutritious foods that contribute to the wellness, healthy growth, and development of eligible children and adults receiving care in day care centers, DCHs operating under SOs, and at-risk after school snack programs. Child Nutrition Services (CNS) within the Department of Education administers CACFP. Eligibility Determinations CNS utilizes Federal certifications or State licenses to determine eligibility for participation in the program. The Office of the State Auditor (OSA) tested eligibility determinations for 23 facilities and found: • one SO provided expired Federal certifications to support eligibility applications for two childcare facilities (CCFs). The certifications expired in February of 2022; however, the application was approved in September 2022, and the provider was reimbursed for all claims in fiscal year 2023. OSA verified the facility was certified. • two DCH providers had capacities reduced as a result of Department of Health and Human Services inspections; however, the reduced capacities were not documented on the revised applications. The DCH providers continued to claim at a higher capacity, resulting in questioned costs totaling $1,383. • for 10 providers that were licensed as CCFs, CNS could not provide documentation to verify that providers were operating in a private residence and not a commercial or academic property. OSA verified that 8 of the 10 CCFs were private residences. OSA selected a non-statistical random sample. Claims for Reimbursement Each adult and childcare institution including DCHs, at-risk facilities, and childcare centers must submit a monthly CFR to the State. Independent centers and at-risk centers submit claims directly to CNS. CFRs from DCHs are first submitted to SOs, who are responsible for reviewing and consolidating claims into one comprehensive CFR for submission to CNS. CNS reimburses the SOs and centers for meals served based on information documented in the CFR. CNS utilizes the Child Nutrition Program (CNPWeb) system to process monthly claims. Providers enter information such as operating days, meal types, enrollment, attendance, and licensure into the system. This information is processed through system edit checks to ensure CFRs are allowable. CNS relies on the system edits; however, the edits were not properly implemented and operating as intended during fiscal year 2023. OSA tested meals claimed on 60 CFRs submitted by sponsors or SOs and found: • 23 CFRs included meals claimed which exceeded allowable licensed capacity for the facility. CNS approved and paid the claims without requesting documentation to support the allowability of the meals claimed. Of the 23 CFRs: o 21 providers indicated shift feeding. Shift feeding allows providers to serve meals over licensed capacity if children are not all in care at the same time. The submitted claims did not include documentation to support that capacity was not exceeded at any one time. o three providers did not indicate shift feeding; however, the average daily meals and attendance exceeded capacity. o 15 CFRs included nine providers that were allowed to claim in excess of licensed capacity; CNS erroneously allowed the providers’ children in determination of allowable capacity. Questioned costs related to undocumented shift feeding or meals claimed in excess of licensed capacity totaled $16,421 in fiscal year 2023. • one CFR had meals claimed that exceeded the maximum number of meals per child in attendance, resulting in questioned costs of $8. • two CFRs had meals claimed where attendance exceeded enrollment, resulting in questioned costs totaling $534. • 11 CFRs included claims for evening snacks served; however, application records indicate the facility was closed, resulting in questioned costs totaling $1,016. OSA selected consolidated CFRs submitted by one SO for all 12 months; a risk-based approach was used to select DCH claims from those consolidated CFRs. OSA selected a non-statistical random sample of all other CFRs. Context: In fiscal year 2023, CACFP expenditures totaled $9.8 million, of which $9.7 million in CACFP funds was provided to 104 sponsors. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • CCFs currently eligible to operate as DCHs may not be eligible to continue participating as DCHs if it is determined that the properties are commercial properties. Recommendation: We recommend that the Department enhance policies and procedures to require: • a review of licensing status, property type and capacity for all providers during each fiscal year; • documentation to support claims made in excess of licensed capacity or enrollment; and • a secondary review of monthly CFRs for accuracy prior to approval. We further recommend that the Department follow up with sponsors and SOs to identify unallowable costs and recoup costs if warranted. Corrective Action Plan: See F-23 Management’s Response: The Department partially agrees with this finding. The Department disagrees with the finding in relation to the property type, according to Federal Guidelines, submitted to OSA directly from the USDA, the State Agency is in compliance with Small Facility Approvals. Due to the state interpretation, we will develop a property form for new small facilities to confirm their residential status prior to approval for participation into the CACFP Program. The Department will update procedures to support claims made in excess of licensed capacity or enrollment and will require a secondary review of CFRs. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 Auditor’s Concluding Remarks: CACFP Memorandum #1-94 provided by the U.S. Department of Agriculture specifically states that CACFP regulations define a DCH as a private residence, and that commercial properties, including churches and schools, are not private residences and are not eligible to participate in CACFP as a family DCH. CNS could not provide verification that providers were operating in a private residence and not a commercial or academic property. The finding remains as stated. (State Number: 23-1115-02)
(2023-047) Title: Internal control over CACFP subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S Department of Agriculture Assistance Listing Title: Child and Adult Care Food Program (CACFP) Assistance Listing Number: 10.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 7 CFR 226.6 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must: • evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring procedures. • verify that the subrecipient is audited as required when a subrecipient’s Federal award expenditures are expected to equal or exceed $750,000 during the fiscal year. • monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 7 CFR 226.6 outlines specific scheduling requirements for monitoring by the Department including: • reviewing at least 33.3 percent of all institutions annually; • reviewing Sponsoring Organizations (SOs) that operate 1 to 100 facilities at least once every three years; and • reviewing SOs that operate more than 100 facilities, which conduct activities other than the Child and Adult Care Food Program (CACFP), that have been identified during a recent review as having serious management problems, or that are at risk of having serious management problems, at least once every two years. Condition: CACFP provides nutritious foods that contribute to the wellness, healthy growth, and development of eligible children and adults receiving care in day care centers, day care homes, and at-risk after school snack programs. Child Nutrition Services (CNS) is responsible for monitoring approximately 104 subrecipients that administer these services. The level of monitoring required by Federal regulations must be determined using a risk-based approach. Subrecipient risk evaluation procedures should include considerations of: • the subrecipient’s experience with the program, • the results of subrecipient audits, • changes in personnel or systems, and • the extent of Federal awarding agency monitoring procedures. Subrecipient risk evaluation The level of subrecipient monitoring procedures performed in fiscal year 2023 were based on CACFP regulations rather than a risk-based approach as required by Federal regulations. In response to this repeat finding, CNS developed a documented risk evaluation process which will be utilized to plan monitoring activities for fiscal year 2024. Subrecipient audit verification CNS identified 22 non-profit and for-profit subrecipients which expended over $750,000 in fiscal year 2023, therefore requiring verification of subrecipient audits. The Office of the State Auditor (OSA) identified one additional subrecipient that required a Single Audit that CNS did not identify. OSA was able to confirm that the subrecipient did have a Single Audit as required. Additionally, CNS did not obtain documentation from subrecipients to support extensions for audits that had not been completed. Subrecipient monitoring As noted above, in accordance with CACFP regulations, CNS utilizes a three-year administrative review cycle to monitor subrecipients. Reviews are required to be completed by the end of the cycle ending September 30 of each fiscal year and include both on-site and desk reviews. CNS schedules and conducts the reviews, holds exit meetings, provides the subrecipient with a report, and if applicable, requires the subrecipient to document corrective action plans, which CNS follows up on as needed. Once corrective action is completed, CNS issues a final review closeout letter. OSA tested a sample of eight scheduled administrative reviews that were required for completion in fiscal year 2023 and identified two reviews that were started within the cycle but not yet completed. The on-site reviews were conducted April 4, 2023, and May 23, 2023, respectively, but the desk portion of the reviews had not been completed as of February 2024; therefore, the exit meeting and reports have not been issued. OSA selected a non-statistical random sample. Context: In fiscal year 2023, CACFP expenditures totaled $9.8 million, of which $9.7 million in CACFP funds was provided to 104 subrecipients. Cause: • Lack of adequate policies and procedures • Lack of staff resources available to complete the administrative reviews timely Effect: • Noncompliance with Federal regulations • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. • Subrecipients may not be complying with Federal statutes, regulations, or the terms and conditions of the subaward. Recommendation: We recommend that the Department: • utilize and evaluate the effectiveness of the newly established risk evaluation process; • enhance policies and procedures to ensure that audit reports for all subrecipients receiving over $750,000 in Federal awards requiring audits are properly identified, tracked, received, and reviewed; • enhance documentation to support reasons for late or missing audit reports; and • implement a process to ensure that the backlog of reviews is completed and allocate resources to ensure all portions of the administrative reviews are fully completed. Corrective Action Plan: See F-23 Management’s Response: The Department agrees with this finding. The CACFP Team in Child Nutrition has made significant improvements since the prior year single audit. This finding is due to the timing of the single audit and the time it takes to implement corrective action, the Department responding to a Federal Audit, the withdrawal of a subrecipient, and the process to hire additional staff. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1115-01)
(2023-037) Title: Internal control over CNC special reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 170 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Agencies must report each subaward that equals or exceeds the first-tier subaward threshold of $30,000 in Federal funds in the public-facing Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Condition: When an amount exceeding the first-tier subaward threshold is awarded to a subrecipient, the Department must collect and enter data into FSRS. The Department did not report any of its first-tier subawards under the Child Nutrition Cluster (CNC) in FSRS for fiscal year 2023. Context: In fiscal year 2023, the Department was required to report first-tier subawards totaling approximately $70 million under CNC. First-tier subawards account for 88 percent of the program’s fiscal year 2023 expenditures. Cause: Lack of policies and procedures Effect: • Noncompliance with Federal regulations • First-tier subaward information for CNC was not reported to the Federal government. This information may be used for programmatic, policy, or statistical purposes. Recommendation: The Department developed and implemented policies and procedures beginning July 1, 2023; therefore, we recommend that the Department monitor these newly established policies and procedures to ensure that they have been properly implemented. This will ensure subawards meeting or exceeding the first-tier threshold are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The existing procedure for monitoring FFATA reporting now includes Child Nutrition Awards as of 7/1/23. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1203-01)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-041) Title: Internal control over the submission of CNC Schedule of Expenditures of Federal Awards information needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.502 and .510; 7 CFR 250.58(e); U.S. Department of Agriculture Policy No. FD-104 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended, including distribution or use of food commodities. Federal non-cash assistance, such as food commodities must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. For a cluster of programs, the SEFA must list individual Federal programs within the cluster. In meeting the commodity offer value of donated foods for the school food authority, the distributing agency must use the cost-per-pound donated food price posted annually by the U.S. Department of Agriculture (USDA), the most recently published cost-per-pound price in the USDA donated foods catalog, and/or a rolling average of the USDA prices. Each distributing or recipient agency must choose a method of valuing USDA donated foods for audit purposes. In most cases, it is recommended that a distributing or recipient agency use one of the options listed in 7 CFR 250.58(e). Once a method of assigning value to USDA donated foods is selected, it must be used consistently in all its audit activities and the State must maintain a record of the means of valuing donated foods for such purposes. Condition: The Department must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Department submitted exhibits to OSC that: • incorrectly excluded $2.4 million of fresh food distributed to subrecipients and additional commodity items received. • incorrectly reported $1,417 of expenditures under ALN 10.555 National School Lunch Program that should have been reported under ALN 10.556 Special Milk Program. Context: In fiscal year 2023, noncash assistance totaling $2.4 million was not reported to OSC by the Department for inclusion on the SEFA. Noncash assistance for the Child Nutrition Cluster totaled $8.5 million in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Inaccurate reporting of expenditure amounts on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department implement policies and procedures that: • outline the method of valuing USDA donated foods in accordance with Federal regulations. • require a comprehensive review of SEFA schedules prior to submission to OSC. In addition, we recommend enhanced oversight over policies and procedures to ensure they are consistently applied and the SEFA is accurate and complete. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The child nutrition department will create a procedure for reporting the SEFA numbers to DOE Finance. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-02)
(2023-042) Title: Internal control over CNC donated food inventory needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 250.12 and .19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. On an annual basis, the distributing agency must conduct a physical review of donated food inventories at all storage facilities used by the distributing agency and must reconcile physical and book inventories of donated foods. The distributing agency must ensure that a separate inventory record of donated foods is maintained. The distributing agency’s system of inventory management must ensure that donated foods are distributed in a timely manner and in optimal condition. Condition: The Child Nutrition Cluster includes the School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children, and the Fresh Fruit and Vegetable Program. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs, to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools, and to encourage consumption of nutritious agriculture commodities. The Department receives donated foods from the U.S. Department of Agriculture (USDA) for distribution to School Food Authorities (SFAs). In fiscal year 2022, the Department implemented a new inventory system for tracking donated foods. The Office of the State Auditor (OSA) tested 10 donated food items to ensure that the Department had properly tracked the items. OSA reviewed USDA food requests, inventory receipts, and distributions made to SFAs to verify that the documentation corresponded to information in the inventory system and physical inventory counts. OSA identified the following two instances where the records did not agree: • For one food item, system inventory records identified 52 cases more than OSA calculated, and the physical inventory count indicated 41 cases less than the system inventory records. • For the other food item, system inventory records identified nine cases less than OSA calculated, and the physical inventory count indicated 17 cases more than the system inventory records. In addition, for nine of the food items tested, system inventory records did not align with the physical inventory count; variances ranged from 2 to 41 cases. The Department did not document justification for the inventory discrepancies. OSA selected a non-statistical random sample. OSA performed a physical inventory inspection of all items that remained in inventory on the inspection date and identified that discrepancies existed between the system inventory items and the physical items on hand for 37 of the 41 food items tested. The Department did not document justification for the inventory discrepancies. Context: In fiscal year 2023, the Department distributed approximately $8.5 million of USDA donated foods to SFAs. Cause: Lack of oversight to ensure that: • the newly implemented inventory system is properly configured; and • review, remediation and justification of inventory discrepancies is documented Effect: • Noncompliance with Federal regulations • Inaccurate reporting of noncash Federal awards on the Schedule of Expenditures of Federal Awards • Theft, loss, or damage of inventory may go undetected. Recommendation: We recommend that the Department: • review the configuration of the inventory system to remediate variances, • regularly reconcile system inventory records to physical inventory counts, and • document the justification of any inventory discrepancies. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. The error was found to be a ticketing issue in CNPWeb, and a ticket was issued to remediate the problem. Staff will continue to provide paper back-up until the computer system is found to be reliable. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-05)
(2023-043) Title: Internal control over CNC subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 7 CFR 210.18; 7 CFR 225.7; U.S. Department of Agriculture Policy Memo SP 46-2015 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. The Department must conduct administrative reviews of School Food Authorities (SFAs) participating in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). These procedures must also be followed, as applicable, to conduct administrative reviews of the afterschool snacks, Special Milk Program (SMP) and the Fresh Fruit and Vegetable Program (FFVP). The Department must review sponsors to ensure compliance with Summer Food Service Program (SFSP) regulations. The Department is required to conduct a review of base year certification and benefit issuance documentation for any SFA requesting approval to participate in NSLP or SBP using U.S. Department of Agriculture (USDA) Special Provision 2, which is a provision established to reduce application burdens and simplify claim procedures. The review must occur at some point during the base year. If errors are identified as a result of the review, the Department must adjust all of the SFA’s closed claims that occurred in the current school year. Condition: The Child Nutrition Cluster (CNC) includes the NSLP, SBP, SMP for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE partners with local SFAs to provide benefits to school-aged children. DOE has assigned subrecipient monitoring responsibilities, which include administrative reviews and other reviews as needed, to the Child Nutrition Services (CNS) division. Administrative reviews of all SFAs are required at least once every five years. CNS utilizes a spreadsheet to track and facilitate the reviews and a USDA questionnaire to document the completion of the review. CNS is required to retain documentation to support all elements of the administrative reviews and to demonstrate the SFA’s compliance with the program. The Office of the State Auditor (OSA) tested 15 NSLP and SFSP administrative reviews and found: • the review tracking spreadsheet was not fully completed for two reviews; • questionnaires were not fully completed for three reviews; and • information on the USDA questionnaire was inaccurate for four reviews. Therefore, documentation does not support that all required areas were reviewed in accordance with Federal regulations; however, the Final Review Report issued and corrective action taken suggests that a full onsite review was completed. OSA selected a non-statistical random sample. In addition, CNS must perform reviews for all SFAs that have applied to participate in USDA Special Provision 2. These base reviews provide the required information necessary to determine the level of claims the SFA may submit in the subsequent year. After completion of the base year review, a letter detailing the results, including any adjustments to previously submitted claims, is provided to the SFA. The SFA is required to adjust claims and enrollment data through the claim revision process and CNS is responsible for verifying that the appropriate revisions have been completed. In fiscal year 2023, CNS identified 99 SFAs that required a base year review. OSA tested 15 base year reviews and identified nine SFAs that did not properly revise claims, and CNS did not verify that the appropriate revisions had been completed. OSA selected a non-statistical random sample. Context: In fiscal year 2023, CNC expenditures totaled approximately $79 million, of which approximately $69 million was provided to 247 SFAs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be complying with Federal statues, regulations, or the terms and conditions of the subaward. • Potential questioned costs and disallowances. Base year reviews provide authorization for the level of allowable claims the SFA can claim in subsequent periods. Without a base year review and necessary revisions, SFAs could be underclaiming or overclaiming costs. Recommendation: We recommend that the Department implement policies and procedures and increase oversight to ensure that: • reviews are completed as required and supporting documentation is retained; • SFAs revise claims appropriately after a base year review; and • CNS verifies that claim adjustments occur as necessary. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. Policies and procedures will be implemented, and training will be provided to ensure that reviews are completed and documentation is retained, SFA claims are revised appropriately, and verifications of claim adjustments occur as necessary. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 (State Number: 23-1203-03)
(2023-031) Title: Internal control over SNAP eligibility determinations and benefit calculations needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $7,491 Likely Questioned Costs: Undeterminable; incorrectly calculated Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to clients. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.1 and .10; Families First Coronavirus Response Act (Public Law 116-127), Section 2302 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. Individuals or a group of individuals paying a reasonable amount for meals or meals and lodging must be considered boarders and are not eligible to participate in SNAP independently of the household providing the board. State agencies must calculate a household’s expenses based on the expenses the household expects to be billed for during the certification period (12 months). The Families First Coronavirus Response Act (FFCRA) established emergency allotments for households participating in SNAP to provide temporary food needs at the applicable maximum allotment for the household size. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all casefile information necessary to properly process eligibility determinations and benefit calculations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations and related benefit calculations. The Office of the State Auditor (OSA) tested 60 household monthly benefit payments to verify the accuracy of SNAP operations utilizing ACES, and identified the following: • Three underpayments of monthly SNAP benefits totaling $1,242 due to errors by Department personnel while processing manual ACES case file modifications to income information • Four overpayments of monthly SNAP benefits, including: o one benefit overpayment totaling $918 due to income information not updated by the Department in the ACES case file in a timely manner o two benefit overpayments totaling $2,974; an income data exchange with ACES appropriately adjusted income information to the correct prior date in each case file; however, previously issued monthly benefit payments were not recalculated and recovered from households accordingly. o one benefit overpayment totaling $3,599; the client should have been classified as a “boarder” within the household, and therefore, ineligible to participate in SNAP independently of the household providing the board. • One case was identified where household expenses from which benefit amounts were calculated had not been updated since 2018. The Department did not calculate the household’s benefit allotment based on expected annual expenses, in line with the 12-month redetermination period required by SNAP program regulations. The client was paid an accurate total monthly benefit due to the emergency allotment from FFCRA, which provided the maximum benefit amount for this case. OSA selected a non-statistical random sample. The Department does not have adequate policies and procedures in place to ensure that ACES case file modifications, whether manual or system interfaced, that result in adjustments to previously issued monthly SNAP benefits are appropriately processed. This includes a recalculation of previously issued benefits when case file modifications are processed, establishment of corresponding overpayments or underpayments, and related follow-up actions with households. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits may be incorrectly calculated, resulting in households being underpaid and/or overpaid. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement additional policies and procedures to ensure that: • case information entered into ACES is accurate; • automated eligibility determinations and benefit calculations are processed in accordance with Federal regulations; and • recalculations of previously issued benefits and related follow-up actions occur when case file modifications are retroactive. Corrective Action Plan: See F-19 Management’s Response: The Department partially agrees with the exceptions noted; however, the Office for Family Independence has policies in place to ensure that information that is entered into ACES is accurate, that automated client eligibility determinations are processed in accordance with federal law and that recalculations of file modifications are retroactive, as applicable. The Department will continue to review its operating procedures to identify opportunities for improvement. Regarding the one case identified where household expenses had not been updated since 2018: The Head of Household (HH) has been receiving the full standard (FSUA) which means the expense deduction has been changing. The client & Department have been updating the medical expense deduction with timely verifications from the client. On the signed Review, the client checked that the above listed expenses were correct and checked the HH had no other shelter expenses other than the ones listed above. These actions are in compliance with 7 CFR 273.10(d)(4). The Department asserts that adequate safeguards are in place. The cost of implementing the recommendations would exceed the benefit realized in achieving 100 percent accuracy in determining eligibility. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: Regarding the one case noted in Management’s Response, the ACES case file does note changes in household medical expenses and Full Standard Utility Allowance (FSUA) values, including confirmation that the expenses were accurate during the household’s most recent annual recertification; however, the household’s monthly rent expense has been documented as “anticipated” and has not changed since 2018. The expenses have never been verified. 7 CFR 273.10 requires anticipated expenses to be based on the most recent month’s bills. At the time of audit testing, the expense information remained unchanged and unverified for approximately five years. For the seven exceptions identified which were not addressed in Management’s Response, existing policies and procedures resulted in inaccurate benefit payments. OSA recognizes that achieving 100 percent accuracy in determining eligibility and calculating benefit payments would likely not be feasible; however, a sample payment error rate of approximately 12 percent indicates that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 23-1108-02)
(2023-032) Title: Internal control over Medicaid and SNAP deceased client cases needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture U.S. Department of Health and Human Services Assistance Listing Title: SNAP Cluster (COVID-19) Medicaid Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561; 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $8,329 (ALN 10.551) Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) tested a sample of cases where Supplemental Nutrition Assistance Program (SNAP) benefits were issued after the client’s date of death (DOD). Issuance of benefits to a deceased client does not necessarily result in unallowable program costs, as the issued benefits may not be expended; therefore, an error rate cannot be applied to the population and a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.8 and .14 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. State agency action on information items about recipient households shall include review of information and comparison of it to case record information. State agencies must initiate and pursue actions on recipient households within 45 days of the receipt of the information items. States shall establish a system to verify and ensure that benefits are not issued to individuals who are deceased. States shall use the Social Security Administration’s (SSA) Death Master File, obtained through the State Verification and Exchange System. Condition: The Office for Family Independence (OFI) manages the Automated Client Eligibility System (ACES) that is used to determine eligibility for Federal assistance programs, including Medicaid and SNAP. Information maintained in ACES is relied upon by OFI for determining monthly SNAP benefits issued to client Electronic Benefit Transaction (EBT) cards, and by the Office of MaineCare Services for processing Medicaid claims. OFI relies on numerous data sources for identifying and providing client DOD information for input into ACES, including monthly data exchanges with the Maine Center for Disease Control & Prevention (MeCDC) Vital Records and weekly data reports from the SSA’s Death Master File. Federal program regulations require OFI to act on client cases within 45 days of receipt of DOD information. This includes review and comparison of DOD information to ACES case file information, and suspension of program participation and related benefits as warranted. OFI policies for SNAP require deactivation of the client’s EBT card as well as expungement of authorized benefits from the EBT card. If activity occurred on the client’s EBT card subsequent to the DOD, the case must be reported as potential fraud and referred for investigation. The Office of the State Auditor (OSA) obtained DOD information from MeCDC Vital Records and compared it to clients who received Medicaid and SNAP benefits during fiscal year 2023. OSA identified 95 Medicaid claims with service dates after DOD in fiscal year 2023 and reviewed 30 clients with the largest paid claim amounts. Because certain Medicaid claims with service dates after DOD are considered allowable, claims paid on behalf of the deceased clients noted below are not reported as questioned costs: • Two clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. • Two clients did not have a DOD recorded in ACES but were reported as deceased by MeCDC Vital Records. Furthermore, four Medicaid clients with an incorrect DOD identified by OSA during the fiscal year 2022 audit were still not corrected in ACES. OSA identified 671 cases where SNAP benefits were issued more than 52 days following the client’s DOD; this benchmark was applied to denote the 45-day Federal program regulation related to weekly receipt of DOD information. OSA tested 60 of these SNAP cases and identified the following: • 18 single member household clients had EBT card purchase activity after DOD. Of these 18 clients: o 14 clients had transaction activity after DOD that occurred in fiscal year 2023, resulting in unallowable costs totaling $8,329, as follows: • For 13 of the 14 clients, unauthorized transaction activity totaling $7,297 occurred between the actual DOD and the Department’s receipt and processing of the DOD information in ACES. • One of the 14 clients did not have a DOD recorded in their ACES case file at the time of audit testing but was reported as deceased by MeCDC Vital Records; this resulted in $1,032 of unauthorized transaction activity. o Four clients’ DOD occurred in fiscal year 2023 and benefits continued to be authorized and issued; however, the unallowable purchase activity began subsequent to fiscal year 2023. o Four clients were not identified as potential fraud in the ACES case file. As a result, they were not referred for investigation as required by OFI policies. • Five clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. This resulted from the Department’s practice of entering DODs as the last day of the month or an alternative date from public information sources in order to suspend benefits in cases where DOD information is not immediately available; however, the Department had MeCDC Vital Records information at the time of DOD input for all five clients and should have entered DODs based on those records. • One client did not have a DOD recorded in their ACES case file but was reported as deceased by MeCDC Vital Records; benefits were authorized during fiscal year 2023, but no unauthorized transaction activity occurred. • 10 clients’ benefits were not expunged upon receipt of DOD information as required by OFI policies; benefits were only expunged by the system-automated process based on inactivity after 274 days. For 2 of the 10 clients, the EBT card was never deactivated; therefore, benefits remained open and available for use 274 days after DOD. • One client’s case remained open two months after OFI was notified of the client’s DOD, resulting in two months of unauthorized SNAP benefit issuances. • Two clients’ ACES case file information partially matched DOD information from MeCDC Vital Records, including names and dates of birth; however, the client social security numbers did not match. The Department did not review the cases to determine appropriate follow-up action. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately: • 575,000 Medicaid clients with $2.5 billion in Federal benefits. Of the 575,000 Medicaid clients, 9,826 had a DOD in fiscal year 2023. • 127,000 SNAP clients with $484.8 million in Federal benefits. Of the 127,000 SNAP clients, 2,021 had a DOD in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Medicaid claims paid on behalf of deceased clients may go undetected. • SNAP benefits issued to deceased clients may result in unauthorized EBT card purchase activity. • Known questioned costs for SNAP • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that DOD information is received, reviewed, and updated in ACES on a more frequent basis to prevent unallowable Medicaid claim payments, and unauthorized SNAP benefit issuances and EBT card purchase activity. In addition, we recommend that the Department review all client cases noted in the Condition of this finding to ensure that: • ACES case file DOD information is accurate; • SNAP benefits are expunged and EBT cards are deactivated in accordance with existing policies; • cases are identified as potential fraud and referred for investigation as warranted; and • unallowable costs are identified and reported to Federal oversight agencies, and required recoupment activities are pursued. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with this finding and will review the current SOP governing DOD procedures and will implement enhancements to ensure DOD is updated and that related required actions are taken within allowable timeframes. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-04)
(2023-033) Title: Internal control over automated SNAP eligibility certification periods needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $18,090 Likely Questioned Costs: Undeterminable; incorrectly suspending Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to households. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.10 and .12 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP, which includes automatic cutoff of participation for households which have not been recertified at the end of their certification period. SNAP households must be assigned eligibility certification periods of at least six months unless the household is classified as exempt based on program regulations. The State agency must have at least one contact with each SNAP household every 12 months. Submission of periodic eligibility reports is required by non-exempt households. Non-exempt households that are certified for longer than six months must file a periodic report between four months and six months, as required by the State agency. In addition, the State agency must not require the submission of periodic reports by households certified for 12 months or less in which all adult members are elderly or have a disability and no earned income. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all case file information necessary to properly process eligibility determinations and benefit computations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations, including notification letters to clients when 6-month reports and 12-month redeterminations of eligibility are required. All SNAP households, except for elderly and disabled cases with no earned income, are required to submit 6-month reports. In addition, all SNAP households must undergo an annual redetermination of eligibility. Each household’s recertification requirements are indicated by date fields in the ACES case file. If a required report or redetermination is not completed by the date indicated in the applicable field, the case’s monthly SNAP benefit is automatically suspended by the system. The Office of the State Auditor (OSA) tested a sample of 60 cases automatically suspended for failure to complete a required review in fiscal year 2023 to verify the accuracy of automated SNAP operations utilizing ACES. In 23 of the 60 cases tested, OSA identified that ACES incorrectly suspended benefits, as follows: • 20 cases were suspended due to inaccurate information in the applicable ACES date field. The Department identified the issue within ACES and implemented a system reconfiguration to correct review dates; however, the reconfiguration did not account for SNAP 6-month report and annual redetermination requirements. Of the 20 suspensions: o seven cases continued to receive SNAP benefits after a failure to complete required 6-month reports. This resulted in the following benefit overpayments, none of which were identified by the Department: • Two cases were suspended three months after the 6-month reporting requirement, resulting in known overpayments of $959 and $2,410. • Two cases were suspended four months after the 6-month reporting requirement, resulting in known overpayments of $1,597 and $525. • Three cases were suspended five months after the 6-month reporting requirement, resulting in known overpayments of $2,941, $2,376, and $1,818. o six cases were underpaid SNAP benefits totaling $5,941 because of incorrect benefit suspensions, ranging from one to five months prior to the applicable 6-month reporting requirement. o five cases were underpaid SNAP benefits totaling $2,194 because of incorrect benefit suspensions, ranging from 2 to 11 months prior to the annual redetermination requirement. o two cases were never required to submit 6-month reports or annual redeterminations since commencement of SNAP benefits in May 2021 and August 2021. This resulted in overpayments for the entirety of fiscal year 2023 totaling $2,539 and $2,925, respectively. • Three cases were suspended due to inaccurate information in the ACES case file indicating that required reviews were not completed. One case never received an automated ACES notification letter alerting them to complete the required 6-month report because of the system reconfiguration previously noted, and as a result, benefits were suspended. Two cases required annual redetermination information, which was submitted to the Department prior to the benefit suspension date, but benefits ended or lapsed due to untimely or incomplete review by the Department. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. 469 clients were automatically suspended by ACES during fiscal year 2023 due to recertification or redetermination requirements. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight • Automated SNAP eligibility system recertification and suspension criteria was not configured in accordance with Federal regulations. Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • Benefits may be incorrectly suspended, resulting in households being underpaid or overpaid. Recommendation: We recommend that the Department enhance policies and procedures to ensure that automated SNAP eligibility certification periods and related ACES case file fields are properly configured to process benefits in accordance with Federal regulations. In addition, we recommend that the Department identify underpayments and/or overpayments resulting from recertification period errors and take action as warranted. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with the exceptions as noted and has previously taken the necessary steps to eliminate these issues. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-03)
(2023-035) Title: Internal control over SNAP EBT card security needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 274.5 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The State is required to provide the following minimum security and control procedures for EBT cards: secure storage; access limited to authorized personnel; inventory control records; and a periodic review and validation of inventory controls and records by parties not otherwise involved in maintaining control records. Issuance, inventory, reconciliation, and other accountability records must be maintained for a period of three years. Condition: The Supplemental Nutrition Assistance Program (SNAP) provides monthly benefits to eligible households to purchase nutritious foods. The program utilizes Electronic Benefit Transfer (EBT) cards as the mechanism to provide benefits. SNAP benefit information is transmitted to the Electronic Payment Processing and Information Control (EPPIC) system used for EBT. An EBT card is issued using the EPPIC system and mailed to the client’s mailing address. EBT cards that are undeliverable are returned to the regional Department of Health and Human Services office for processing. Upon receipt of a returned EBT card, the Automated Client Eligibility System (ACES) is used to verify a client’s personal information, determine what action to take based on case file information, and document the action through electronic case notes. The Department has assigned responsibility for processing returned EBT cards to one employee. This process includes receipt of returned cards, maintenance of inventory control records including supporting documentation in ACES and EPPIC, and destruction or retransmission of the card. Proper segregation of duties does not exist within the current process, as recordkeeping, custody of EBT cards, and authorization of processing activity should be assigned to different employees. In addition, the State is required to maintain accurate and complete inventory records for returned EBT cards. Returned cards are either destroyed or retransmitted, and are tracked using spreadsheets and related documentation through client case notes in ACES and EBT card activity in the EPPIC system. The Office of the State Auditor (OSA) tested a sample of 60 returned EBT cards to verify the accuracy and completeness of the activity recorded on the inventory tracking spreadsheets, and identified: • one returned EBT card that should have been retransmitted to an updated address was erroneously processed for destruction; • one returned EBT card with a case note documenting an unknown card location and an assumption that the card was erroneously destroyed, so a new card was retransmitted without confirmation of the destruction; • one returned EBT card where processing activity was not documented in a case note until eight months after retransmission; and • one returned EBT card which was recorded on the tracking spreadsheet as retransmitted to an updated address, but no documentation was maintained in the client case file to support that a new address was obtained. OSA selected a non-statistical random sample. A data analysis and cross-match of the inventory tracking spreadsheets identified: • one returned EBT card was erroneously recorded on the destruction spreadsheet twice; and • eight returned EBT cards were processed utilizing inaccurate client information; multiple client names were tied to the same client identification number on the spreadsheets. Quarterly, management monitors the inventory tracking spreadsheets by selecting a sample of returned EBT cards for review; however, this oversight procedure does not detect and correct processing errors on a timely basis. Furthermore, the State is required to maintain secure storage of, and limited access to, EBT cards. The current process does not require proper physical security over returned EBT cards as the returned cards are placed in an open mailbox during processing. While the mailbox is in a secure area of the facility, any employee working within the regional office has access to this mailbox. Existing policies and procedures in place do not provide adequate security over returned EBT cards, including proper segregation of duties, maintenance of accurate and complete inventory control records, and appropriate physical security controls over EBT cards. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. The Department processed 2,447 returned EBT cards; 1,013 were recorded as retransmitted and 1,434 were recorded as destroyed. Cause: • Lack of segregation of duties • Lack of adequate policies and procedures relating to the security and oversight of returned EBT cards Effect: • Potential unauthorized use of EBT cards, which may lead to unallowable costs • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to require adequate security and oversight of returned EBT cards, including proper segregation of duties within the process, maintenance of accurate and complete inventory control records, and increased physical security controls. Corrective Action Plan: See F-20 Management’s Response: Although the Department agrees that errors were identified, these data entry errors were clerical in nature, and do not impact the security of our returned EBT cards. The Standard Operating Procedure for processing returned EBT cards does segregate duties sufficiently. First, all returned cards are received by District Operations in the Lewiston Regional Office, and they are distributed to a separate resource for processing. Second, a clerical resource in the Lewiston office reviews the case to determine the appropriate course of action, and then subsequently takes and logs that action (in spreadsheets and in ACES). Third, the EBT manager performs quality checks on the logs to ensure the proper handling of the cards/cases. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: While OSA recognizes that some of the exceptions noted in the Condition are clerical in nature, instances of unknown card locations, inaccurate processing activity, and untimely or incomplete documentation were also identified. The current procedure does not segregate duties sufficiently. First, inventory control records are not initiated upon receipt by District Operations prior to placement in an unsecured mailbox for processing. Second, as identified in Management’s Response as the clerical resource, the same employee maintains custody of returned EBT cards, determines and authorizes the course of action, has responsibility for inventory control records, and proceeds with physical destruction or retransmission of cards; therefore, there is no segregation between recordkeeping, custody, and authorization of processing activity. The subsequent performance of quality checks by the EBT manager only covers a sample of returned cards and occurs on a quarterly basis. This does not provide segregation of duties within the process. The finding remains as stated. (State Number: 23-1108-01)
(2023-037) Title: Internal control over CNC special reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 170 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Agencies must report each subaward that equals or exceeds the first-tier subaward threshold of $30,000 in Federal funds in the public-facing Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Condition: When an amount exceeding the first-tier subaward threshold is awarded to a subrecipient, the Department must collect and enter data into FSRS. The Department did not report any of its first-tier subawards under the Child Nutrition Cluster (CNC) in FSRS for fiscal year 2023. Context: In fiscal year 2023, the Department was required to report first-tier subawards totaling approximately $70 million under CNC. First-tier subawards account for 88 percent of the program’s fiscal year 2023 expenditures. Cause: Lack of policies and procedures Effect: • Noncompliance with Federal regulations • First-tier subaward information for CNC was not reported to the Federal government. This information may be used for programmatic, policy, or statistical purposes. Recommendation: The Department developed and implemented policies and procedures beginning July 1, 2023; therefore, we recommend that the Department monitor these newly established policies and procedures to ensure that they have been properly implemented. This will ensure subawards meeting or exceeding the first-tier threshold are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-20 Management’s Response: The Department agrees with this finding. The existing procedure for monitoring FFATA reporting now includes Child Nutrition Awards as of 7/1/23. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1203-01)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-041) Title: Internal control over the submission of CNC Schedule of Expenditures of Federal Awards information needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.502 and .510; 7 CFR 250.58(e); U.S. Department of Agriculture Policy No. FD-104 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended, including distribution or use of food commodities. Federal non-cash assistance, such as food commodities must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. For a cluster of programs, the SEFA must list individual Federal programs within the cluster. In meeting the commodity offer value of donated foods for the school food authority, the distributing agency must use the cost-per-pound donated food price posted annually by the U.S. Department of Agriculture (USDA), the most recently published cost-per-pound price in the USDA donated foods catalog, and/or a rolling average of the USDA prices. Each distributing or recipient agency must choose a method of valuing USDA donated foods for audit purposes. In most cases, it is recommended that a distributing or recipient agency use one of the options listed in 7 CFR 250.58(e). Once a method of assigning value to USDA donated foods is selected, it must be used consistently in all its audit activities and the State must maintain a record of the means of valuing donated foods for such purposes. Condition: The Department must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Department submitted exhibits to OSC that: • incorrectly excluded $2.4 million of fresh food distributed to subrecipients and additional commodity items received. • incorrectly reported $1,417 of expenditures under ALN 10.555 National School Lunch Program that should have been reported under ALN 10.556 Special Milk Program. Context: In fiscal year 2023, noncash assistance totaling $2.4 million was not reported to OSC by the Department for inclusion on the SEFA. Noncash assistance for the Child Nutrition Cluster totaled $8.5 million in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Inaccurate reporting of expenditure amounts on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy, or statistical purposes. Recommendation: We recommend that the Department implement policies and procedures that: • outline the method of valuing USDA donated foods in accordance with Federal regulations. • require a comprehensive review of SEFA schedules prior to submission to OSC. In addition, we recommend enhanced oversight over policies and procedures to ensure they are consistently applied and the SEFA is accurate and complete. Corrective Action Plan: See F-21 Management’s Response: The Department agrees with this finding. The child nutrition department will create a procedure for reporting the SEFA numbers to DOE Finance. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-02)
(2023-042) Title: Internal control over CNC donated food inventory needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 7 CFR 250.12 and .19 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. On an annual basis, the distributing agency must conduct a physical review of donated food inventories at all storage facilities used by the distributing agency and must reconcile physical and book inventories of donated foods. The distributing agency must ensure that a separate inventory record of donated foods is maintained. The distributing agency’s system of inventory management must ensure that donated foods are distributed in a timely manner and in optimal condition. Condition: The Child Nutrition Cluster includes the School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children, and the Fresh Fruit and Vegetable Program. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs, to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools, and to encourage consumption of nutritious agriculture commodities. The Department receives donated foods from the U.S. Department of Agriculture (USDA) for distribution to School Food Authorities (SFAs). In fiscal year 2022, the Department implemented a new inventory system for tracking donated foods. The Office of the State Auditor (OSA) tested 10 donated food items to ensure that the Department had properly tracked the items. OSA reviewed USDA food requests, inventory receipts, and distributions made to SFAs to verify that the documentation corresponded to information in the inventory system and physical inventory counts. OSA identified the following two instances where the records did not agree: • For one food item, system inventory records identified 52 cases more than OSA calculated, and the physical inventory count indicated 41 cases less than the system inventory records. • For the other food item, system inventory records identified nine cases less than OSA calculated, and the physical inventory count indicated 17 cases more than the system inventory records. In addition, for nine of the food items tested, system inventory records did not align with the physical inventory count; variances ranged from 2 to 41 cases. The Department did not document justification for the inventory discrepancies. OSA selected a non-statistical random sample. OSA performed a physical inventory inspection of all items that remained in inventory on the inspection date and identified that discrepancies existed between the system inventory items and the physical items on hand for 37 of the 41 food items tested. The Department did not document justification for the inventory discrepancies. Context: In fiscal year 2023, the Department distributed approximately $8.5 million of USDA donated foods to SFAs. Cause: Lack of oversight to ensure that: • the newly implemented inventory system is properly configured; and • review, remediation and justification of inventory discrepancies is documented Effect: • Noncompliance with Federal regulations • Inaccurate reporting of noncash Federal awards on the Schedule of Expenditures of Federal Awards • Theft, loss, or damage of inventory may go undetected. Recommendation: We recommend that the Department: • review the configuration of the inventory system to remediate variances, • regularly reconcile system inventory records to physical inventory counts, and • document the justification of any inventory discrepancies. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. The error was found to be a ticketing issue in CNPWeb, and a ticket was issued to remediate the problem. Staff will continue to provide paper back-up until the computer system is found to be reliable. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 (State Number: 23-1203-05)
(2023-043) Title: Internal control over CNC subrecipient monitoring procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332; 7 CFR 210.18; 7 CFR 225.7; U.S. Department of Agriculture Policy Memo SP 46-2015 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. The Department must conduct administrative reviews of School Food Authorities (SFAs) participating in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). These procedures must also be followed, as applicable, to conduct administrative reviews of the afterschool snacks, Special Milk Program (SMP) and the Fresh Fruit and Vegetable Program (FFVP). The Department must review sponsors to ensure compliance with Summer Food Service Program (SFSP) regulations. The Department is required to conduct a review of base year certification and benefit issuance documentation for any SFA requesting approval to participate in NSLP or SBP using U.S. Department of Agriculture (USDA) Special Provision 2, which is a provision established to reduce application burdens and simplify claim procedures. The review must occur at some point during the base year. If errors are identified as a result of the review, the Department must adjust all of the SFA’s closed claims that occurred in the current school year. Condition: The Child Nutrition Cluster (CNC) includes the NSLP, SBP, SMP for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE partners with local SFAs to provide benefits to school-aged children. DOE has assigned subrecipient monitoring responsibilities, which include administrative reviews and other reviews as needed, to the Child Nutrition Services (CNS) division. Administrative reviews of all SFAs are required at least once every five years. CNS utilizes a spreadsheet to track and facilitate the reviews and a USDA questionnaire to document the completion of the review. CNS is required to retain documentation to support all elements of the administrative reviews and to demonstrate the SFA’s compliance with the program. The Office of the State Auditor (OSA) tested 15 NSLP and SFSP administrative reviews and found: • the review tracking spreadsheet was not fully completed for two reviews; • questionnaires were not fully completed for three reviews; and • information on the USDA questionnaire was inaccurate for four reviews. Therefore, documentation does not support that all required areas were reviewed in accordance with Federal regulations; however, the Final Review Report issued and corrective action taken suggests that a full onsite review was completed. OSA selected a non-statistical random sample. In addition, CNS must perform reviews for all SFAs that have applied to participate in USDA Special Provision 2. These base reviews provide the required information necessary to determine the level of claims the SFA may submit in the subsequent year. After completion of the base year review, a letter detailing the results, including any adjustments to previously submitted claims, is provided to the SFA. The SFA is required to adjust claims and enrollment data through the claim revision process and CNS is responsible for verifying that the appropriate revisions have been completed. In fiscal year 2023, CNS identified 99 SFAs that required a base year review. OSA tested 15 base year reviews and identified nine SFAs that did not properly revise claims, and CNS did not verify that the appropriate revisions had been completed. OSA selected a non-statistical random sample. Context: In fiscal year 2023, CNC expenditures totaled approximately $79 million, of which approximately $69 million was provided to 247 SFAs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be complying with Federal statues, regulations, or the terms and conditions of the subaward. • Potential questioned costs and disallowances. Base year reviews provide authorization for the level of allowable claims the SFA can claim in subsequent periods. Without a base year review and necessary revisions, SFAs could be underclaiming or overclaiming costs. Recommendation: We recommend that the Department implement policies and procedures and increase oversight to ensure that: • reviews are completed as required and supporting documentation is retained; • SFAs revise claims appropriately after a base year review; and • CNS verifies that claim adjustments occur as necessary. Corrective Action Plan: See F-22 Management’s Response: The Department agrees with this finding. Policies and procedures will be implemented, and training will be provided to ensure that reviews are completed and documentation is retained, SFA claims are revised appropriately, and verifications of claim adjustments occur as necessary. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 (State Number: 23-1203-03)
(2023-048) Confidential finding, see below for more information Title: Internal control over UI claim payments needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 20 CFR 615.8; Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; Unemployment Insurance Program Letter No. 5-13; 26 MRSA 1190 through 1199 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. A State administering Unemployment Insurance (UI) must have State laws and policies in place that are consistent with Federal provisions and required by 20 CFR 615.8; the Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; and Unemployment Insurance Program Letter No. 5-13, as follows: • Standards for claim filing and processing including appeals and reviews, communication with claimants and employers, eligibility standards and disqualifications, and Interstate Benefit Payments and agreements • Standards for reasonable work search criteria and policies requiring performance of internal audits of work search activity • Standards for program integrity outlining procedures for identification and recovery of overpayments and penalties, including recovery through offset of future benefit payments The State of Maine’s statutory requirements for UI program benefits are outlined in 26 MRSA 1190 through 1199. Condition: Pursuant to paragraph 6.63 of the U.S. Government Accountability Office’s Government Auditing Standards (also known as the Yellow Book), we omitted details from this finding as they are confidential under the provisions of 5 MRSA 244-C (3). Though the content of this finding has been redacted, we provided the Department(s) with detailed information regarding the specific condition we identified, as well as the related criteria, context, causes, effects, and our specific recommendations for improvement. Department controls The Department has complementary controls in place over claimant eligibility, including: • performance of internal work search audits by MDOL personnel for one percent of weekly claims, and • establishment of a Benefits Quality Control Unit tasked with investigating a prescribed number of UI paid claims and denied claims each week. Audit testing results As part of the continuing eligibility determination process, State UI law requires a weekly claim to be filed and work search activities to be reported. In OSA’s test of 60 regular UI claimants’ continuing eligibility, one claimant did not report work search activities for the weeks claimed. Despite not meeting continuing eligibility requirements, the claimant was issued State UI benefits totaling $220. OSA selected a non-statistical random sample. Data analytics Data analytic procedures surrounding continuing eligibility requirements for weekly claim submission and work search activity entered by claimants identified that: • 18 claimants reported repetitive work search activities indicative of program abuse for consecutive benefit weeks and throughout the majority of their claims; • one claimant reported new return to work dates in 19 consecutive weekly claim submissions, which generated new temporary unemployment waivers that allowed the claimant to file all 19 weekly claims without reporting work search activities; • one claimant was granted a waiver with no end date, allowing the claimant to file 24 weekly claims without reporting work search activities; and • five claimants filed a total of eight claims with no work search activities reported. Context: The UI program provided $96.8 million in State UI benefits and $1.3 million in Federal UI benefits during fiscal year 2023. Cause: • Lack of adequate policies and procedures over initial and continuing claimant eligibility determinations • Lack of adequate supervisory oversight of information system application controls Effect: • Claimants may be incorrectly determined eligible for UI benefits without meeting Federal program requirements, which may result in unallowable issuances of benefit payments that could remain undetected. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance policies and procedures to require: • that eligibility requirements are met and adequately supported prior to issuance of benefit payments. • implementation of additional information system application controls. • incorporation of data analytics and data cross-matching procedures to prevent or detect payments to ineligible claimants. This will provide assurance that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. Corrective Action Plan: See F-24 Management’s Response: In a general sense the state has added significant controls around benefit eligibility, especially in the vital statistics area and work search. We continue to monitor all eligibility controls and work collaboratively with the state and federal government to enhance controls and strengthen program integrity. Specific to the findings: The agency agrees with the 18 claimants who provided repetitive work search efforts on their weekly claims. This subset of claimants used CareerCenter activities as their work search for numerous subsequent weeks. Per the Commission Rules, Chapter 10, subsection B (1) and (2), certain CareerCenter activities may count as a work search for the week claimed. However, due to recent OSA audits, additional controls were defined and implemented to avoid this exact scenario. The change was implemented with our 06/28/2023 build. As of that time in cases where a claimant reports a CareerCenter related activity on more than two weekly benefit claims, the claimant will be scheduled for a fact-finding to discuss their work search efforts. We anticipate seeing a significant improvement in this area for SFY 24. We agree with the finding on the single claimant who was granted consecutive work search waivers by reporting they were scheduled to start new employment within the next two weeks on their weekly claim. Additional controls in this area will be formulated and a change request filed to address this finding. We agree with the remaining six claimants’ control findings which were due to a variety of staff training issues. Some of these are in process of being addressed through refresher training, some of which had already been detected prior to OSA’s finding. One case will require additional review but was possibly due to a staff data entry error. We are encouraged by the continued collaboration with OSA, which has resulted in meaningful change and added controls in this area. We appreciate the opportunity provided and look forward to continued improvement. Contact: Laura Boyett, Director, Bureau of Unemployment Compensation, DOL, 207-621-5156 (State Number: 23-1302-01)
(2023-048) Confidential finding, see below for more information Title: Internal control over UI claim payments needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 20 CFR 615.8; Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; Unemployment Insurance Program Letter No. 5-13; 26 MRSA 1190 through 1199 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. A State administering Unemployment Insurance (UI) must have State laws and policies in place that are consistent with Federal provisions and required by 20 CFR 615.8; the Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; and Unemployment Insurance Program Letter No. 5-13, as follows: • Standards for claim filing and processing including appeals and reviews, communication with claimants and employers, eligibility standards and disqualifications, and Interstate Benefit Payments and agreements • Standards for reasonable work search criteria and policies requiring performance of internal audits of work search activity • Standards for program integrity outlining procedures for identification and recovery of overpayments and penalties, including recovery through offset of future benefit payments The State of Maine’s statutory requirements for UI program benefits are outlined in 26 MRSA 1190 through 1199. Condition: Pursuant to paragraph 6.63 of the U.S. Government Accountability Office’s Government Auditing Standards (also known as the Yellow Book), we omitted details from this finding as they are confidential under the provisions of 5 MRSA 244-C (3). Though the content of this finding has been redacted, we provided the Department(s) with detailed information regarding the specific condition we identified, as well as the related criteria, context, causes, effects, and our specific recommendations for improvement. Department controls The Department has complementary controls in place over claimant eligibility, including: • performance of internal work search audits by MDOL personnel for one percent of weekly claims, and • establishment of a Benefits Quality Control Unit tasked with investigating a prescribed number of UI paid claims and denied claims each week. Audit testing results As part of the continuing eligibility determination process, State UI law requires a weekly claim to be filed and work search activities to be reported. In OSA’s test of 60 regular UI claimants’ continuing eligibility, one claimant did not report work search activities for the weeks claimed. Despite not meeting continuing eligibility requirements, the claimant was issued State UI benefits totaling $220. OSA selected a non-statistical random sample. Data analytics Data analytic procedures surrounding continuing eligibility requirements for weekly claim submission and work search activity entered by claimants identified that: • 18 claimants reported repetitive work search activities indicative of program abuse for consecutive benefit weeks and throughout the majority of their claims; • one claimant reported new return to work dates in 19 consecutive weekly claim submissions, which generated new temporary unemployment waivers that allowed the claimant to file all 19 weekly claims without reporting work search activities; • one claimant was granted a waiver with no end date, allowing the claimant to file 24 weekly claims without reporting work search activities; and • five claimants filed a total of eight claims with no work search activities reported. Context: The UI program provided $96.8 million in State UI benefits and $1.3 million in Federal UI benefits during fiscal year 2023. Cause: • Lack of adequate policies and procedures over initial and continuing claimant eligibility determinations • Lack of adequate supervisory oversight of information system application controls Effect: • Claimants may be incorrectly determined eligible for UI benefits without meeting Federal program requirements, which may result in unallowable issuances of benefit payments that could remain undetected. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance policies and procedures to require: • that eligibility requirements are met and adequately supported prior to issuance of benefit payments. • implementation of additional information system application controls. • incorporation of data analytics and data cross-matching procedures to prevent or detect payments to ineligible claimants. This will provide assurance that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. Corrective Action Plan: See F-24 Management’s Response: In a general sense the state has added significant controls around benefit eligibility, especially in the vital statistics area and work search. We continue to monitor all eligibility controls and work collaboratively with the state and federal government to enhance controls and strengthen program integrity. Specific to the findings: The agency agrees with the 18 claimants who provided repetitive work search efforts on their weekly claims. This subset of claimants used CareerCenter activities as their work search for numerous subsequent weeks. Per the Commission Rules, Chapter 10, subsection B (1) and (2), certain CareerCenter activities may count as a work search for the week claimed. However, due to recent OSA audits, additional controls were defined and implemented to avoid this exact scenario. The change was implemented with our 06/28/2023 build. As of that time in cases where a claimant reports a CareerCenter related activity on more than two weekly benefit claims, the claimant will be scheduled for a fact-finding to discuss their work search efforts. We anticipate seeing a significant improvement in this area for SFY 24. We agree with the finding on the single claimant who was granted consecutive work search waivers by reporting they were scheduled to start new employment within the next two weeks on their weekly claim. Additional controls in this area will be formulated and a change request filed to address this finding. We agree with the remaining six claimants’ control findings which were due to a variety of staff training issues. Some of these are in process of being addressed through refresher training, some of which had already been detected prior to OSA’s finding. One case will require additional review but was possibly due to a staff data entry error. We are encouraged by the continued collaboration with OSA, which has resulted in meaningful change and added controls in this area. We appreciate the opportunity provided and look forward to continued improvement. Contact: Laura Boyett, Director, Bureau of Unemployment Compensation, DOL, 207-621-5156 (State Number: 23-1302-01)
(2023-050) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of Labor U.S. Department of Transportation U.S. Department of Education Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Highway Planning and Construction (Federal-Aid Highway Program) Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 17.225; 20.205; 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.430; 5 MRSA 7061 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. On BHR’s website, job classification specifications, along with the date the job class was last reviewed and updated, are published. The Office of the State Auditor (OSA) tested 24 job classification specifications and information reported on BHR’s website for compliance with 5 MRSA 7061. For 12 of the 24 job classification specifications tested, OSA identified that the date the job class was last updated was beyond five years. Prior to March 2023, BHR only updated the date on a job classification if a change was made. Although BHR began recording review dates regardless of whether a change was made in April 2023, there is no tracking mechanism in place to effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2023, $125 million of payroll expenditures were charged to Federal grants. This represents approximately 10 percent of fiscal year 2023 Statewide payroll expenditures, which totaled $1.2 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2023. Cause: • Competing priorities • Lack of resources • Lack of adequate policies and procedures Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • allocate resources to ensure proper oversight and monitoring of agency-level activities related to the maintenance of the State classification and compensation plan in accordance with State statute; • continue implementation of policies and procedures to ensure updates or reviews of the State classification and compensation plan are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-24 Management’s Response: The Department partially agrees with this finding. The Department disagrees with the statement “The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees...”. The focus is on 5 MRSA 7061 Classification Plan which “records the duties and responsibilities of all positions” rather than on the statute for the Compensation Plan, 5 MRSA 7065, which relates to compensation in that it establishes “minimum and maximum salary rates and such intermediate rates as the director considers desirable.” Consistent with 5 MRSA 7065, salary schedules were established and remain in place, changing through bargained and legislatively approved adjustments. To determine the basis for appropriate compensation, one must review these salary schedules along with any recruitment and retention adjustments (permitted by 5 MRSA 7065; paid in addition to and outside of the salary schedule), any agreements for market pay adjustments, laws which provide for additional pay components, and all negotiated pay items contained in the associated collective bargaining agreements. The Compensation Plan has been reviewed and adjusted during the period of this audit (July 2022 through June 2023), as evidenced by the on-line publication of new salary schedules effective July 3, 2022. In the 5-year period of July 2018 through June 2023 (the period the audit looked at class specs), the published salary schedules have been adjusted eight (8) times. The Department also disagrees with the recommendation’s reference “classification and compensation plan” as a singular plan. These are two separate plans in statute, and the recommendations are directed toward the classification plan. The Department agrees with the recommendations in that they provide for improved processes. It is worth noting the new language now in place by statute under the Classification Plan states: “Beginning in 2024, the procedure must provide for a comprehensive review of the classification plan every 10 years to make modifications and improvements as determined necessary.” Contact: Breena Bissell, Director, Bureau of Human Resources, DAFS, 207-624-7368 Auditor’s Concluding Remarks: The classification plan (5 MRSA 7061) and the compensation plan (5 MRSA 7065) are inherently linked. A well-maintained classification plan that accurately reflects the current duties and responsibilities of each job classification is essential for determining the correct salary rates in the compensation plan. Without regular reviews of the duties and responsibilities of each job classification, the data used to establish salary rates may be outdated and inaccurate. This can lead to discrepancies between the work performed by employees and the compensation they receive. The procedural nature and link between the classification plan and the compensation plan is further evidenced in the portion of the statute that BHR omitted in Management’s Response. BHR references “minimum and maximum salary rates and such intermediate rates as the director considers desirable.” The full reference states, “The officer shall, as soon as practicable after the adoption of the classification plan, submit to the Legislature a proposed plan of compensation developed by the officer showing for each class or position in the classified service minimum and maximum salary rates and such intermediate rates as the officer considers desirable.” The italicized portion of the statute emphasizes the importance of the classification plan as the foundation for developing the compensation plan. Therefore, it is critical that the classification plan is regularly reviewed and updated, and documentation of the process is maintained, to ensure the integrity of the compensation plan. The finding remains as stated. (State Number: 23-0111-01)
(2023-050) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of Labor U.S. Department of Transportation U.S. Department of Education Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Highway Planning and Construction (Federal-Aid Highway Program) Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 17.225; 20.205; 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.430; 5 MRSA 7061 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. On BHR’s website, job classification specifications, along with the date the job class was last reviewed and updated, are published. The Office of the State Auditor (OSA) tested 24 job classification specifications and information reported on BHR’s website for compliance with 5 MRSA 7061. For 12 of the 24 job classification specifications tested, OSA identified that the date the job class was last updated was beyond five years. Prior to March 2023, BHR only updated the date on a job classification if a change was made. Although BHR began recording review dates regardless of whether a change was made in April 2023, there is no tracking mechanism in place to effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2023, $125 million of payroll expenditures were charged to Federal grants. This represents approximately 10 percent of fiscal year 2023 Statewide payroll expenditures, which totaled $1.2 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2023. Cause: • Competing priorities • Lack of resources • Lack of adequate policies and procedures Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • allocate resources to ensure proper oversight and monitoring of agency-level activities related to the maintenance of the State classification and compensation plan in accordance with State statute; • continue implementation of policies and procedures to ensure updates or reviews of the State classification and compensation plan are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-24 Management’s Response: The Department partially agrees with this finding. The Department disagrees with the statement “The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees...”. The focus is on 5 MRSA 7061 Classification Plan which “records the duties and responsibilities of all positions” rather than on the statute for the Compensation Plan, 5 MRSA 7065, which relates to compensation in that it establishes “minimum and maximum salary rates and such intermediate rates as the director considers desirable.” Consistent with 5 MRSA 7065, salary schedules were established and remain in place, changing through bargained and legislatively approved adjustments. To determine the basis for appropriate compensation, one must review these salary schedules along with any recruitment and retention adjustments (permitted by 5 MRSA 7065; paid in addition to and outside of the salary schedule), any agreements for market pay adjustments, laws which provide for additional pay components, and all negotiated pay items contained in the associated collective bargaining agreements. The Compensation Plan has been reviewed and adjusted during the period of this audit (July 2022 through June 2023), as evidenced by the on-line publication of new salary schedules effective July 3, 2022. In the 5-year period of July 2018 through June 2023 (the period the audit looked at class specs), the published salary schedules have been adjusted eight (8) times. The Department also disagrees with the recommendation’s reference “classification and compensation plan” as a singular plan. These are two separate plans in statute, and the recommendations are directed toward the classification plan. The Department agrees with the recommendations in that they provide for improved processes. It is worth noting the new language now in place by statute under the Classification Plan states: “Beginning in 2024, the procedure must provide for a comprehensive review of the classification plan every 10 years to make modifications and improvements as determined necessary.” Contact: Breena Bissell, Director, Bureau of Human Resources, DAFS, 207-624-7368 Auditor’s Concluding Remarks: The classification plan (5 MRSA 7061) and the compensation plan (5 MRSA 7065) are inherently linked. A well-maintained classification plan that accurately reflects the current duties and responsibilities of each job classification is essential for determining the correct salary rates in the compensation plan. Without regular reviews of the duties and responsibilities of each job classification, the data used to establish salary rates may be outdated and inaccurate. This can lead to discrepancies between the work performed by employees and the compensation they receive. The procedural nature and link between the classification plan and the compensation plan is further evidenced in the portion of the statute that BHR omitted in Management’s Response. BHR references “minimum and maximum salary rates and such intermediate rates as the director considers desirable.” The full reference states, “The officer shall, as soon as practicable after the adoption of the classification plan, submit to the Legislature a proposed plan of compensation developed by the officer showing for each class or position in the classified service minimum and maximum salary rates and such intermediate rates as the officer considers desirable.” The italicized portion of the statute emphasizes the importance of the classification plan as the foundation for developing the compensation plan. Therefore, it is critical that the classification plan is regularly reviewed and updated, and documentation of the process is maintained, to ensure the integrity of the compensation plan. The finding remains as stated. (State Number: 23-0111-01)
(2023-050) Title: Internal control over monitoring of employee classification and compensation needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Administrative and Financial Services State Bureau: Human Resources Federal Agency: U.S. Department of Labor U.S. Department of Transportation U.S. Department of Education Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Highway Planning and Construction (Federal-Aid Highway Program) Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 17.225; 20.205; 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.430; 5 MRSA 7061 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Costs of compensation are allowable to the extent that personal services are rendered during the period of performance under the Federal award, total compensation is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity, and follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies. 5 MRSA 7061 states that the (Bureau of Human Resources (BHR)) director shall record the duties and responsibilities of all positions in State service and establish classes for these positions. The procedure shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. Condition: BHR maintains the job classification specifications and related compensation plan of State employees. A specific salary specification and grade is assigned based on the duties and responsibilities referenced in the job classification specification; this represents reasonable compensation for the services rendered for all positions that inhabit a given job classification specification. The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees, and that the position appointments under the job classification specification were made and maintained in accordance with State statute. While BHR relies on data collected from State agencies to implement procedures regarding the classification plan, BHR retains ultimate oversight responsibility. BHR is the only agency with the authority to modify the classification plan. According to 5 MRSA 7061, BHR shall provide for periodic updating of job descriptions at least every five years to accurately reflect current duties and responsibilities of each job classification. On BHR’s website, job classification specifications, along with the date the job class was last reviewed and updated, are published. The Office of the State Auditor (OSA) tested 24 job classification specifications and information reported on BHR’s website for compliance with 5 MRSA 7061. For 12 of the 24 job classification specifications tested, OSA identified that the date the job class was last updated was beyond five years. Prior to March 2023, BHR only updated the date on a job classification if a change was made. Although BHR began recording review dates regardless of whether a change was made in April 2023, there is no tracking mechanism in place to effectively identify the dates of the last review and next scheduled review, thus hindering compliance with the statutory five-year cycle. OSA selected a non-statistical random sample. Context: • During fiscal year 2023, $125 million of payroll expenditures were charged to Federal grants. This represents approximately 10 percent of fiscal year 2023 Statewide payroll expenditures, which totaled $1.2 billion. • BHR was responsible for managing approximately 1,200 job classification specifications in fiscal year 2023. Cause: • Competing priorities • Lack of resources • Lack of adequate policies and procedures Effect: State employee job classification and compensation may not accurately reflect the current duties and responsibilities of each position. Without documented evidence that review activities are occurring, BHR cannot ensure that the decisions involving the classification and compensation plan of all State employee positions are properly supported by documentation that accurately reflects the current duties and responsibilities of each position. As a result, this may lead to noncompliance with Federal and State regulations. Recommendation: We recommend that the Department: • allocate resources to ensure proper oversight and monitoring of agency-level activities related to the maintenance of the State classification and compensation plan in accordance with State statute; • continue implementation of policies and procedures to ensure updates or reviews of the State classification and compensation plan are adequately documented; and • implement a tracking mechanism to accurately monitor the dates of past reviews and schedule forthcoming reviews to aid in adherence to the statutory requirement. Corrective Action Plan: See F-24 Management’s Response: The Department partially agrees with this finding. The Department disagrees with the statement “The assigned salary grade provides a basis for the allowability of compensation costs charged to Federal awards by documenting the reasonableness of compensation for services rendered by State employees...”. The focus is on 5 MRSA 7061 Classification Plan which “records the duties and responsibilities of all positions” rather than on the statute for the Compensation Plan, 5 MRSA 7065, which relates to compensation in that it establishes “minimum and maximum salary rates and such intermediate rates as the director considers desirable.” Consistent with 5 MRSA 7065, salary schedules were established and remain in place, changing through bargained and legislatively approved adjustments. To determine the basis for appropriate compensation, one must review these salary schedules along with any recruitment and retention adjustments (permitted by 5 MRSA 7065; paid in addition to and outside of the salary schedule), any agreements for market pay adjustments, laws which provide for additional pay components, and all negotiated pay items contained in the associated collective bargaining agreements. The Compensation Plan has been reviewed and adjusted during the period of this audit (July 2022 through June 2023), as evidenced by the on-line publication of new salary schedules effective July 3, 2022. In the 5-year period of July 2018 through June 2023 (the period the audit looked at class specs), the published salary schedules have been adjusted eight (8) times. The Department also disagrees with the recommendation’s reference “classification and compensation plan” as a singular plan. These are two separate plans in statute, and the recommendations are directed toward the classification plan. The Department agrees with the recommendations in that they provide for improved processes. It is worth noting the new language now in place by statute under the Classification Plan states: “Beginning in 2024, the procedure must provide for a comprehensive review of the classification plan every 10 years to make modifications and improvements as determined necessary.” Contact: Breena Bissell, Director, Bureau of Human Resources, DAFS, 207-624-7368 Auditor’s Concluding Remarks: The classification plan (5 MRSA 7061) and the compensation plan (5 MRSA 7065) are inherently linked. A well-maintained classification plan that accurately reflects the current duties and responsibilities of each job classification is essential for determining the correct salary rates in the compensation plan. Without regular reviews of the duties and responsibilities of each job classification, the data used to establish salary rates may be outdated and inaccurate. This can lead to discrepancies between the work performed by employees and the compensation they receive. The procedural nature and link between the classification plan and the compensation plan is further evidenced in the portion of the statute that BHR omitted in Management’s Response. BHR references “minimum and maximum salary rates and such intermediate rates as the director considers desirable.” The full reference states, “The officer shall, as soon as practicable after the adoption of the classification plan, submit to the Legislature a proposed plan of compensation developed by the officer showing for each class or position in the classified service minimum and maximum salary rates and such intermediate rates as the officer considers desirable.” The italicized portion of the statute emphasizes the importance of the classification plan as the foundation for developing the compensation plan. Therefore, it is critical that the classification plan is regularly reviewed and updated, and documentation of the process is maintained, to ensure the integrity of the compensation plan. The finding remains as stated. (State Number: 23-0111-01)
(2023-054) Title: Internal control over DOT subrecipient and contractor determinations needs improvement Prior Year Findings: None State Department: Transportation State Bureau: Finance and Administration Planning Federal Agency: U.S. Department of Transportation Assistance Listing Title: Formula Grants for Rural Areas and Tribal Transit Program (COVID-19) Assistance Listing Number: 20.509 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.331; 2 CFR 200.510 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended. At a minimum, the SEFA must provide total Federal awards expended for each individual Federal program and the Assistance Listing Number (ALN) and include the total amount provided to subrecipients from each Federal program. Condition: The Department must complete and submit exhibits and related schedules to the Office of the State Controller (OSC) at the close of each fiscal year to report Federal award information for inclusion on the State’s SEFA. OSC is responsible for compiling this information on behalf of the State. The Office of the State Auditor reviewed SEFA amounts reported to OSC by the Department and identified $3,064,233 of Federal expenditures incorrectly reported as amounts provided to subrecipients that should have been reported as direct expenditures. The Department did not properly document the role of the parties receiving the funds as vendors and contractors or subrecipients. As a result, vendor and contractor payments were incorrectly included in the initial amount reported on the SEFA as amounts provided to subrecipients. Context: The Department erroneously reported amounts provided to subrecipients totaling $16.3 million and direct expenditures totaling $5.6 million. The correct amounts provided to subrecipients totaled $13.3 million and direct expenditures totaled $8.7 million for fiscal year 2023. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Inaccurate classifications of subrecipients versus vendors could lead to monitoring the activities of vendors, thus utilizing resources that could be allocated to other program needs. • Incomplete or inaccurate reporting of expenditures on the SEFA, which is submitted to the Federal government, may result in incorrect information used for programmatic, policy or statistical purposes. Recommendation: We recommend that the Department enhance procedures to: • document the subrecipient determination process to properly classify vendors and contractors versus subrecipients; and • improve preparation, review, and submission of SEFA information to OSC. Corrective Action Plan: See F-25 Management’s Response: The Department agrees with this finding. The Department will update procedures to ensure the classification of subrecipients versus contractors is documented and to improve the SEFA information that is submitted. Contact: Kathleen Malcolm, Financial Processing Director, MDOT, 207-624-3292 (State Number: 23-1402-01)