(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)
(2023-055) Title: Internal control over ERA Program subrecipient monitoring needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Economic and Community Development State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Emergency Rental Assistance Program (COVID-19) Assistance Listing Number: 21.023 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; 2 CFR 200.332 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must monitor the activities of the subrecipient as necessary to ensure that subawards are used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Condition: In fiscal year 2023, the Department passed through Emergency Rental Assistance (ERA) Program funds to one subrecipient responsible for administering the program. Subrecipient monitoring procedures included providing Federal award information in grant award agreements and frequent communication with the subrecipient; however, the Department did not adequately design and document ongoing monitoring activities to ensure that the subaward was used for authorized purposes and in compliance with Federal regulations. During fiscal year 2023, the Department contracted with a vendor to perform all subrecipient monitoring for the ERA Program, but all monitoring activities occurred subsequent to the final disbursement of ERA Program funds in January 2023. In addition, the Department did not require submission of detailed expenditure information with the subrecipient’s requests for reimbursement of ERA Program funds. A summary spreadsheet outlining actual and projected expenditures for second-tier subrecipients was the only support provided to the Department with each reimbursement request. Context: In fiscal year 2023, the Department expended $39.5 million in ERA Program funds; the entire amount was passed through to the subrecipient. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Noncompliance with Federal regulations • Lack of ongoing subrecipient monitoring procedures could result in subrecipient noncompliance that is not discovered timely. Recommendation: The Office of the State Auditor (OSA) acknowledges that the ERA Program has concluded; however, we recommend that the Department develop and implement policies and procedures to ensure that: • all Federal award program subrecipients of the Department are subject to ongoing monitoring activities during the grant award term. • detailed documentation in support of subrecipient reimbursement requests is received prior to payment approval. In addition, we recommend that the Department monitor subrecipient corrective action related to the results of the retroactive monitoring activities performed by the vendor in order to properly close out the ERA Program. Corrective Action Plan: See F-26 Management’s Response: Although management agrees with this finding, the ERA program was one-time funding that the department was required to award to the subrecipient. The Department determined that because the subrecipient is a quasi-state agency that administers millions of federal dollars for rental assistance under the Section 8 and HOME programs, they did not require the level of oversight cited in the finding. The ERA 1 program is already closed-out with Treasury. If there is any additional funding under that program the department will implement our subrecipient monitoring policies and procedures. Contact: Deborah Johnson, Director, Office of Community Development, DECD, 207-624-9817 Auditor’s Concluding Remarks: OSA again acknowledges that the ERA Program has concluded; however, the deficiencies noted in the Condition and the related recommendations address Department policies and procedures for all Federal award program subrecipients. As stated in Management’s Response, the subrecipient administers a significant amount of Federal funding. This reinforces the need to monitor corrective action related to the results of retroactive monitoring activities performed by the vendor and properly close out the ERA Program. Subrecipient monitoring activities for future subrecipient awards should be adjusted accordingly. The finding remains as stated. (State Number: 23-1695-02)
(2023-056) Title: Internal control over ERA Program performance reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Economic and Community Development State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Emergency Rental Assistance Program (COVID-19) Assistance Listing Number: 21.023 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; Consolidated Appropriations Act, 2021, Section 501(g) The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must submit and certify quarterly compliance reports providing financial and performance data regarding grantee administration of their Emergency Rental Assistance (ERA) Program projects and capture program design in addition to program status data elements. Condition: The Department contracts with a subrecipient to administer the ERA Program. A Memorandum of Understanding between the Department and the subrecipient outlines the following: • The subrecipient is responsible for preparation of all required reporting under the ERA Program. • The Department is responsible for certification and submission of all reports prepared by the subrecipient. The subrecipient prepared five quarterly performance reports during fiscal year 2023, which were certified by the Department during the submission process. The Department provided the Office of the State Auditor with all five quarterly reports; however, the Department could not provide: • documentation to support amounts reported on the State’s fiscal year 2023 ERA Program performance reports, as it was not maintained by the Department. • documentation of review of each performance report prepared by the subrecipient before certification by the Department. As a result, the Department has no assurance that ERA Program information for each quarterly report prepared by the subrecipient and submitted to the Federal government on behalf of the State is accurate or properly supported. Context: In fiscal year 2023, the Department expended $39.5 million in ERA Program funds; the entire amount was passed through to the subrecipient. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: The Department did not properly oversee the ERA Program as required by Federal regulations. ERA Program reports submitted to the Federal government are not properly supported and may not be accurate as documentation is not reviewed or maintained by the Department. Recommendation: We recognize that all ERA Program funds have been disbursed by the Department to the subrecipient; however, reporting requirements are ongoing. For this reason, we recommend that the Department promptly implement policies and procedures to require a documented review and approval of all ERA Program reports prepared by the subrecipient prior to Department certification and submission. This will ensure that information reported to the Federal government is accurate and complete. Corrective Action Plan: See F-26 Management’s Response: The Department agrees with this finding. DECD will take corrective action as advised. Prior to each quarterly report submission deadline, staff will meet with the subrecipient on site and review the data collected for uploading into the report to ensure the content of the submission is accurate. Contact: Deborah Johnson, Director, Office of Community Development, DECD, 207-624-9817 (State Number: 23-1695-01)
(2023-057) Title: Internal control over the submission of HAF Program Schedule of Expenditures of Federal Awards reporting needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Security and Employment Service Center Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Homeowner Assistance Fund Program (COVID-19) Assistance Listing Number: 21.026 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 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 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 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. Federal program expenditures reported on the SEFA must be segregated between direct award expenditures and amounts provided to subrecipients. OSC is responsible for compiling this information on behalf of the State. In fiscal year 2023, the Department of Professional and Financial Regulation received Federal funding and incurred related expenditures under ALN 21.026, the Homeowner Assistance Fund (HAF) Program. The Security and Employment Service Center (SESC), which is responsible for submitting the summary of HAF expenditures to OSC, did not segregate the amounts provided to subrecipients in the exhibits and related schedules provided to OSC. OSC utilized this information to compile and prepare the SEFA. As a result, all HAF expenditures were inaccurately reported as direct expenditures on the State’s fiscal year 2023 SEFA when provided to the Office of the State Auditor for audit purposes. Context: In fiscal year 2023, HAF expenditures totaled $12.3 million. Of that amount, $4.3 million was direct expenditures and $8.0 million was paid to subrecipients. Cause: Lack of adequate internal control relating to Department SEFA submissions to OSC 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 SESC implement additional procedures to improve preparation and submission of SEFA information to OSC. These control procedures will ensure that expenditures are reported accurately on the SEFA. Corrective Action Plan: See F-26 Management’s Response: The Department agrees with this finding. The expenditure data was not correctly classified as sub-recipient expenditures. Contact: Marilyn Leimbach, Director, Security and Employment Service Center, DFPS, DAFS, 207-248-2556 (State Number: 23-1000-01)
(2023-058) Title: Internal control over CSLFRF expenditures needs improvement Prior Year Findings: None State Department: Economic and Community Development State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $591,845 Likely Questioned Costs: $591,845 Criteria: 2 CFR 200.303; 2 CFR 200.302; 2 CFR 200.403; Coronavirus State and Local Fiscal Recovery Fund 2022 Final Rule 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 must be adequately documented. The State’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to determine that such funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) recipients may use funds “to respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.” The CSLFRF 2022 Final Rule states (U.S.) Treasury is maintaining the interim final rule definition of “small business,” which used the Small Business Administration’s (SBA) definition of fewer than 500 employees, or per the standard for that industry, as defined by SBA. Condition: As part of the American Rescue Plan Act, the State was advanced $997 million in Federal CSLFRF to support its response to and recovery from the COVID-19 public health emergency. In response, Public Law 2022, Chapter 168, L.D. 2010 authorized funding to establish an energy rebate program for certain electricity customers. The law required the Department of Economic and Community Development (DECD) to make payments to utility companies for energy rebate credits to the accounts of eligible customers. To support the allowability of energy rebates to small businesses, DECD prepared the “Energy Rate Relief for Small Organizations” business case. In the business case, DECD stated its intent to use CSLFRF funding to provide direct credits to qualifying Maine small businesses to help defray increased electricity costs. DECD noted the project would provide direct relief utilizing the framework established in LD 2010, Resolve, To Help Certain Businesses with Energy Costs. The Maine Jobs and Recovery Review Committee reviewed and approved the business case on behalf of the State under the assumption that energy rebates would be provided to small businesses. DECD relied on utility companies to identify customers eligible for the energy rebate based on energy usage. Utility companies provided detailed lists of the customers which they deemed eligible to receive the rebate, and DECD reviewed and approved the invoices for payment. The Office of the State Auditor (OSA) reviewed the invoices and related payments to utility companies and identified credits were issued to several commercial entities ineligible under the CSLFRF 2022 Final Rule definition of “small business.” The entities listed included large businesses, government entities, and school systems. In total, OSA identified 234 entities credited a total of $591,845 that were not approved as supported by the business case. Context: Energy Rate Relief payments totaled $7.1 million of the $207.8 million in CSLFRF expenditures during fiscal year 2023. Cause: Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department review expenditures charged to CSLFRF, including the above-noted expenditures, to ensure that costs are allowable and align with the approved business case and Federal regulations. Corrective Action Plan: See F-26 Management’s Response: The Department agrees with this finding. Approved business cases are established under a single US Treasury expenditure category. Consistent with legislative direction, the scope of this business case was expanded during the original implementation to include additional allowable expenditure categories; however, the Department did not divide the original business case into multiple business cases to reflect the additional expenditure categories as required. The Department intends on dividing the approved business case into multiple business cases to align with the applicable US Treasury expenditure categories. Contact: Denise Garland, Deputy Commissioner, DECD, 207-624-7496 (State Number: 23-1699-01)
(2023-059) Title: Internal control over CSLFRF subrecipient audit procedures needs improvement Prior Year Findings: None State Department: Economic and Community Development State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Federal Award Identification Number: See E-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; 2 CFR 200.521 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 follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Department must verify that every subrecipient is audited as required by 2 CFR 200, subpart F regarding audit requirements. Furthermore, the Department must issue a management decision for audit findings that relate to Federal awards provided to the subrecipient within six months of acceptance of the audit report by the Federal Audit Clearinghouse. Condition: As part of the American Rescue Plan Act, the State was advanced $997 million in Federal Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) to support its response to and recovery from the COVID-19 public health emergency. The Department of Economic and Community Development (DECD) partnered with subrecipients to support the administration of CSLFRF. The Office of the State Auditor (OSA) selected a sample of three DECD subrecipients subject to Single Audit requirements outlined in 2 CFR 200, subpart F and identified that DECD did not review the subrecipients’ Single Audits. Additionally, one of the subrecipient Single Audit Reports included a CSLFRF finding for not verifying whether beneficiaries were suspended or debarred; DECD did not issue a management decision as required by Federal regulations. OSA selected a non-statistical random sample. Context: For fiscal year 2023, CSLFRF expenditures totaled $207.8 million, of which approximately $55 million was provided to 12 DECD subrecipients. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be complying with Federal statutes, regulations, or the terms and conditions of the subaward. Recommendation: We recommend that the Department enhance policies and procedures to ensure that audit reports for all subrecipients receiving over $750,000 in Federal awards requiring audits are properly reviewed, and management decisions are issued timely. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The selected sample of subrecipient single audits were not reviewed in keeping with federal guidance in 2 CFR 200 and management decision letters were not issued. Moving forward DECD will engage their consulting firm to conduct regular reviews of subrecipient single audits and work with DECD staff to issue timely and actionable management decisions. Contact: Denise Garland, Deputy Commissioner, DECD, 207-624-7496 (State Number: 23-1699-02)
(2023-060) Title: Internal control over CSLFRF subrecipient risk evaluation procedures needs improvement Prior Year Findings: None State Department: Labor State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Federal Award Identification Number: See E-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 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in 2 CFR 200.332. Condition: As part of the American Rescue Plan Act, the State was advanced $997 million in Federal Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) to support its response to and recovery from the COVID-19 public health emergency. The Maine Department of Labor (MDOL) partnered with subrecipients to support the administration of CSLFRF. MDOL has a documented policy that requires subrecipient risk evaluations. The Office of the State Auditor (OSA) tested a sample of 35 subrecipients paid by various State agencies under CSLFRF, including seven MDOL subrecipients, to ensure that proper subrecipient monitoring was performed as required by Federal regulations. MDOL subrecipient monitoring procedures included providing Federal award information in grant award agreements, communicating program guidelines, establishing reporting requirements, providing technical assistance, and communicating with the subrecipients to discuss program performance; however, MDOL could not provide evidence to demonstrate that monitoring procedures were established in response to an evaluation of the subrecipient’s risk of noncompliance for the seven MDOL subrecipients tested. OSA selected a nonstatistical random sample. Context: During fiscal year 2023, the Department provided $2.4 million to 20 MDOL subrecipients, from a total of $110.5 million provided to all CSLFRF subrecipients. Cause: • Lack of supervisory oversight • Lack of adequate procedures Effect: • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. • Subrecipient noncompliance could go undetected. Recommendation: We recommend that the Department enforce policies and procedures that require evaluation of each subrecipient’s risk of noncompliance specifically for the purposes of determining the appropriate subrecipient monitoring to be performed. This will ensure subrecipients are monitored appropriately based on risk designation. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. MDOL received funds via the Maine Jobs and Recovery Plan to accomplish several goals across 20 unique initiatives. To best meet the goals of several initiatives, MDOL selected various partners to work with - via a competitive Request for Applications (RFA) process or other contractual arrangement. MDOL’s competitive RFA process required evaluating individual applicants’ previous experience in managing grants and delivering similar programs, which directly correlated with selection criteria and grantee scoring. After selection, grantees are required to submit quarterly performance reports and participate in grantee check-in calls at least twice per year. For grantees not on track to meet their performance goals, monthly calls were held with interim progress milestones set to track performance. While the above procedures were implemented for all subrecipients, going forward, the Department will document that monitoring procedures were established in response to an evaluation of the subrecipient’s risk of noncompliance. Contact: Samantha Dina, Associate Commissioner, MDOL, 207-816-1714 (State Number: 23-1699-04)
(2023-061) Title: Internal control over CSLFRF reporting needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Security and Employment Service Center Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332(b); 2 CFR 200.510 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with reporting requirements. The Department must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the State’s financial statements which must include the total Federal awards expended. At a minimum, the SEFA must provide total Federal awards expended for each individual Federal program and the Assistance Listing Number (ALN) and include the total amount provided to subrecipients from each Federal program. Condition: The Department of Administrative and Financial Services’ Security and Employment Service Center (SESC) is responsible for accurately recording information needed to report on the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Quarterly Project and Expenditure Reports. Information from these CSLFRF reports is used by the Office of the State Controller for SEFA preparation. The Office of the State Auditor reviewed amounts reported on the SEFA and identified $24.1 million of Federal expenditures incorrectly reported as amounts provided to subrecipients that should have been reported as direct expenditures. SESC inaccurately identified vendors as subrecipients. As a result, vendor payments were incorrectly classified as subrecipient payments on the CSLFRF Quarterly Project and Expenditure Reports and were incorrectly included in the initial amount reported on the SEFA as amounts provided to subrecipients. Context: Payments to the providers totaled $24.1 million of the $207.8 million in CSLFRF expenditures. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Incomplete or inaccurate reporting of expenditures on the CSLFRF reports and SEFA, which are submitted to the Federal government, may result in incorrect information used for programmatic, policy or statistical purposes. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement policies and procedures to ensure contractors and subrecipients are appropriately classified and reported on the CSLFRF Quarterly Project and Expenditure Reports and SEFA. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Security and Employment Service Center will continue to work with our partner agencies to help ensure the sub-recipient/vendor classification is appropriately determined when the initial contracts are written. Contact: Marilyn Leimbach, Director, Security and Employment Service Center, DFPS, DAFS, 207-248-2556 (State Number: 23-1699-03)
(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)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. 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 Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. 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 Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-063) Title: Internal control over Special Education subrecipient audit procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Commissioner’s Office Special Services & Inclusive Education Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-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; 2 CFR 200.521 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 follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Department must issue a management decision for audit findings that relate to Federal awards provided to the subrecipient within six months of acceptance of the audit report by the Federal Audit Clearinghouse. Condition: The Department of Education’s (DOE) School Finance and Operations team within the Commissioner’s Office, in conjunction with DOE’s Office of Special Services & Inclusive Education, is responsible for tracking and reviewing subrecipient audits and issuing management decisions on Special Education Cluster (SEC) subrecipient audit findings. SEC program subrecipients consist of Local Education Agencies and organizations that are provided Federal funding for special education programs. The Office of the State Auditor (OSA) reviewed 23 SEC subrecipients to ensure proper tracking and review of Single Audit Reports, audit findings, and DOE management decisions in response to findings related to SEC funding. For 2 of the 23 subrecipients, OSA requested documentation of management decisions pertaining to findings included in the Single Audit Reports. DOE could not provide management decision letters documenting consideration, review, and approval of the subrecipients’ corrective action plans. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds, of which $66.8 million was provided to 258 subrecipients. Based on OSA’s review, approximately 120 subrecipients were required to undergo a Single Audit in accordance with Federal regulations. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients not complying with Federal statutes, regulations, or the terms and conditions of SEC subawards may not be implementing appropriate corrective action in response to audit findings. Recommendation: We recommend that the Department enhance policies and procedures to ensure that adequate documentation is maintained during the review of audit findings, and that management decisions related to audit findings and corrective action are issued timely to subrecipients. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. The Department will review the current procedure regarding the notification of management decisions related to audit findings and corrective action, to strengthen the areas where prior notifications were missed. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-01)
(2023-063) Title: Internal control over Special Education subrecipient audit procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Commissioner’s Office Special Services & Inclusive Education Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-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; 2 CFR 200.521 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 follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Department must issue a management decision for audit findings that relate to Federal awards provided to the subrecipient within six months of acceptance of the audit report by the Federal Audit Clearinghouse. Condition: The Department of Education’s (DOE) School Finance and Operations team within the Commissioner’s Office, in conjunction with DOE’s Office of Special Services & Inclusive Education, is responsible for tracking and reviewing subrecipient audits and issuing management decisions on Special Education Cluster (SEC) subrecipient audit findings. SEC program subrecipients consist of Local Education Agencies and organizations that are provided Federal funding for special education programs. The Office of the State Auditor (OSA) reviewed 23 SEC subrecipients to ensure proper tracking and review of Single Audit Reports, audit findings, and DOE management decisions in response to findings related to SEC funding. For 2 of the 23 subrecipients, OSA requested documentation of management decisions pertaining to findings included in the Single Audit Reports. DOE could not provide management decision letters documenting consideration, review, and approval of the subrecipients’ corrective action plans. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds, of which $66.8 million was provided to 258 subrecipients. Based on OSA’s review, approximately 120 subrecipients were required to undergo a Single Audit in accordance with Federal regulations. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients not complying with Federal statutes, regulations, or the terms and conditions of SEC subawards may not be implementing appropriate corrective action in response to audit findings. Recommendation: We recommend that the Department enhance policies and procedures to ensure that adequate documentation is maintained during the review of audit findings, and that management decisions related to audit findings and corrective action are issued timely to subrecipients. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. The Department will review the current procedure regarding the notification of management decisions related to audit findings and corrective action, to strengthen the areas where prior notifications were missed. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-01)
(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)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. 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 Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. 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 Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-063) Title: Internal control over Special Education subrecipient audit procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Commissioner’s Office Special Services & Inclusive Education Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-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; 2 CFR 200.521 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 follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Department must issue a management decision for audit findings that relate to Federal awards provided to the subrecipient within six months of acceptance of the audit report by the Federal Audit Clearinghouse. Condition: The Department of Education’s (DOE) School Finance and Operations team within the Commissioner’s Office, in conjunction with DOE’s Office of Special Services & Inclusive Education, is responsible for tracking and reviewing subrecipient audits and issuing management decisions on Special Education Cluster (SEC) subrecipient audit findings. SEC program subrecipients consist of Local Education Agencies and organizations that are provided Federal funding for special education programs. The Office of the State Auditor (OSA) reviewed 23 SEC subrecipients to ensure proper tracking and review of Single Audit Reports, audit findings, and DOE management decisions in response to findings related to SEC funding. For 2 of the 23 subrecipients, OSA requested documentation of management decisions pertaining to findings included in the Single Audit Reports. DOE could not provide management decision letters documenting consideration, review, and approval of the subrecipients’ corrective action plans. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds, of which $66.8 million was provided to 258 subrecipients. Based on OSA’s review, approximately 120 subrecipients were required to undergo a Single Audit in accordance with Federal regulations. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients not complying with Federal statutes, regulations, or the terms and conditions of SEC subawards may not be implementing appropriate corrective action in response to audit findings. Recommendation: We recommend that the Department enhance policies and procedures to ensure that adequate documentation is maintained during the review of audit findings, and that management decisions related to audit findings and corrective action are issued timely to subrecipients. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. The Department will review the current procedure regarding the notification of management decisions related to audit findings and corrective action, to strengthen the areas where prior notifications were missed. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-01)
(2023-063) Title: Internal control over Special Education subrecipient audit procedures needs improvement Prior Year Findings: None State Department: Education State Bureau: Commissioner’s Office Special Services & Inclusive Education Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-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; 2 CFR 200.521 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 follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Department must issue a management decision for audit findings that relate to Federal awards provided to the subrecipient within six months of acceptance of the audit report by the Federal Audit Clearinghouse. Condition: The Department of Education’s (DOE) School Finance and Operations team within the Commissioner’s Office, in conjunction with DOE’s Office of Special Services & Inclusive Education, is responsible for tracking and reviewing subrecipient audits and issuing management decisions on Special Education Cluster (SEC) subrecipient audit findings. SEC program subrecipients consist of Local Education Agencies and organizations that are provided Federal funding for special education programs. The Office of the State Auditor (OSA) reviewed 23 SEC subrecipients to ensure proper tracking and review of Single Audit Reports, audit findings, and DOE management decisions in response to findings related to SEC funding. For 2 of the 23 subrecipients, OSA requested documentation of management decisions pertaining to findings included in the Single Audit Reports. DOE could not provide management decision letters documenting consideration, review, and approval of the subrecipients’ corrective action plans. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds, of which $66.8 million was provided to 258 subrecipients. Based on OSA’s review, approximately 120 subrecipients were required to undergo a Single Audit in accordance with Federal regulations. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients not complying with Federal statutes, regulations, or the terms and conditions of SEC subawards may not be implementing appropriate corrective action in response to audit findings. Recommendation: We recommend that the Department enhance policies and procedures to ensure that adequate documentation is maintained during the review of audit findings, and that management decisions related to audit findings and corrective action are issued timely to subrecipients. Corrective Action Plan: See F-28 Management’s Response: The Department agrees with this finding. The Department will review the current procedure regarding the notification of management decisions related to audit findings and corrective action, to strengthen the areas where prior notifications were missed. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-01)
(2023-064) Title: Internal control over ESF expenditures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Office of Federal Emergency Relief Programs Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $161,468 Likely Questioned Costs: $7,308,277; likely questioned costs were projected by dividing the known questioned costs in our sample by total expenditures tested to establish an error rate, then applying that error rate to total expenditures paid in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; Coronavirus Aid, Relief, and Economic Security Act, Public Law No. 116-136; Coronavirus Response and Relief Supplemental Appropriations Act, Public Law No. 116-260; American Rescue Plan Act, Public Law No. 117-2 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Coronavirus Aid, Relief, and Economic Security Act; Coronavirus Response and Relief Supplemental Appropriations Act; and American Rescue Plan (ARP) Act authorized the creation of the Education Stabilization Fund and its subprograms. Governors and State Education Agencies (SEAs) must demonstrate that costs incurred by governors, SEAs, and subrecipients are allowable under the relevant statutory and regulatory provisions, assurances, and certification and agreement, and consistent with the purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to COVID-19. Condition: Education Stabilization Funds (ESF) were authorized by Federal legislation for use by school administrative units (SAUs) within the State to prevent, prepare for, and respond to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF including planned projects. Applications included detail on costs and the necessity of costs as a result of the COVID-19 pandemic. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for expenditures identified and approved in the application. The Office of the State Auditor (OSA) tested 60 SAU reimbursement requests for ESF and identified the following: • One ARP Elementary and Secondary School Emergency Relief (ESSER) subprogram reimbursement request included an invoice for a tractor purchase totaling approximately $91,000. The SAU’s approved application stated that the purpose of the tractor purchase was to help with lawn mowing, snow removal, and outdoor maintenance so that the school could safely engage in more outdoor learning. • One ARP ESSER subprogram reimbursement request included an invoice for a paving project totaling $47,500. The paving project was included in the SAU’s approved application. The reimbursement request outlined that the “paving improvements in [the] bus area [were] to help facilitate with disinfecting and cleaning of buses.” • Supporting documentation for OFERP’s review prior to approval of one ESSER II subprogram reimbursement request totaling $22,896 was not maintained. OSA was able to verify the allowability of the costs based on documentation provided by OFERP during audit testing. • One ARP ESSER subprogram reimbursement request included oil and electricity utility bills totaling $14,710. • One ESSER II subprogram reimbursement request included oil and electricity utility bills totaling $8,258. All subrecipients had an approved application on file with OFERP. The applications and the invoices were approved for reimbursement by OFERP. The purpose of ESF is to prevent, prepare for, and respond to COVID-19. The project descriptions and supporting documentation for the tractor purchase and paving project provided by the SAU and maintained by the Department do not demonstrate that these reimbursements are a reasonable use of funds consistent with the purpose of ESF. In addition, utility bills such as oil and electricity are routine costs that are supported by a SAU’s annual operating budget, and these reimbursements are not consistent with the purpose of ESF. OSA selected a non-statistical random sample. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of established policies and procedures to ensure that only necessary expenditures are charged to the Federal program • Misinterpretation of Federal regulations Effect: • Noncompliance with Federal regulations • Known questioned costs • Potential future questioned costs and disallowances Recommendation: We recommend that the Department review all expenditures reimbursed using ESF to ensure that only allowable costs are charged to the Federal program. Expenditures that do not meet ESF criteria for allowability should be transferred out of ESF. Corrective Action Plan: See F-28 Management’s Response: The Maine Department of Education (MDOE) disagrees with the identified questioned costs. The FERP utilized guidance provided by the U.S. Department of Education (grantor) and conferred in writing with Maine’s assigned U.S. Department of Education program officer throughout the Education Stabilization Fund application review process. The Maine Department of Education’s FERP provided the auditor with the grantor’s guidance which clearly states that the questioned costs were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Throughout the application review process, FERP utilized ESF federal statutory language and the grantor’s published guidance to determine allowability. Once funding applications were approved, SAUs requested reimbursement from the FERP for the approved costs outlined in the school administrative unit (SAU) application. The FERP reviewed SAU reimbursement requests and provided payment for approved expenses. The ESF costs outlined in this finding were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 Auditor’s Concluding Remarks: Documentation provided by the Department for the reimbursements totaling $161,468 did not provide adequate evidence that the expenditures were reasonable, necessary, and in line with the allowability criteria of ESF, as outlined below: • A $91,000 tractor purchase is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. While outdoor learning space may have been expanded in response to COVID-19, lawn mowing, snow removal, and outdoor maintenance are routine costs of the SAU. • A $47,500 paving project is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. There is no direct correlation between paving improvements and disinfecting and cleaning of buses. • $22,968 in oil and electricity bill reimbursements are not reasonable or necessary uses of funds in response to needs directly arising from the public health emergency. Utility bills are routine costs that are supported by a SAU’s annual operating budget. Federal guidance for the ESF program does not clearly state that the expenditures noted as questioned costs are allowable, reasonable, and necessary to prevent, prepare for, and respond to COVID-19. Furthermore, the Department did not provide grantor guidance to OSA as stated in Management’s Response. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Without documentation and evidence to substantiate that the expenditures are necessary and reasonable in response to needs directly arising from the public health emergency, OSA cannot determine that the reimbursements were consistent with the purpose of ESF; therefore, OSA continues to question the allowability of these costs. The finding remains as stated. (State Number: 23-1235-03)
(2023-064) Title: Internal control over ESF expenditures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Office of Federal Emergency Relief Programs Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $161,468 Likely Questioned Costs: $7,308,277; likely questioned costs were projected by dividing the known questioned costs in our sample by total expenditures tested to establish an error rate, then applying that error rate to total expenditures paid in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; Coronavirus Aid, Relief, and Economic Security Act, Public Law No. 116-136; Coronavirus Response and Relief Supplemental Appropriations Act, Public Law No. 116-260; American Rescue Plan Act, Public Law No. 117-2 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Coronavirus Aid, Relief, and Economic Security Act; Coronavirus Response and Relief Supplemental Appropriations Act; and American Rescue Plan (ARP) Act authorized the creation of the Education Stabilization Fund and its subprograms. Governors and State Education Agencies (SEAs) must demonstrate that costs incurred by governors, SEAs, and subrecipients are allowable under the relevant statutory and regulatory provisions, assurances, and certification and agreement, and consistent with the purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to COVID-19. Condition: Education Stabilization Funds (ESF) were authorized by Federal legislation for use by school administrative units (SAUs) within the State to prevent, prepare for, and respond to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF including planned projects. Applications included detail on costs and the necessity of costs as a result of the COVID-19 pandemic. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for expenditures identified and approved in the application. The Office of the State Auditor (OSA) tested 60 SAU reimbursement requests for ESF and identified the following: • One ARP Elementary and Secondary School Emergency Relief (ESSER) subprogram reimbursement request included an invoice for a tractor purchase totaling approximately $91,000. The SAU’s approved application stated that the purpose of the tractor purchase was to help with lawn mowing, snow removal, and outdoor maintenance so that the school could safely engage in more outdoor learning. • One ARP ESSER subprogram reimbursement request included an invoice for a paving project totaling $47,500. The paving project was included in the SAU’s approved application. The reimbursement request outlined that the “paving improvements in [the] bus area [were] to help facilitate with disinfecting and cleaning of buses.” • Supporting documentation for OFERP’s review prior to approval of one ESSER II subprogram reimbursement request totaling $22,896 was not maintained. OSA was able to verify the allowability of the costs based on documentation provided by OFERP during audit testing. • One ARP ESSER subprogram reimbursement request included oil and electricity utility bills totaling $14,710. • One ESSER II subprogram reimbursement request included oil and electricity utility bills totaling $8,258. All subrecipients had an approved application on file with OFERP. The applications and the invoices were approved for reimbursement by OFERP. The purpose of ESF is to prevent, prepare for, and respond to COVID-19. The project descriptions and supporting documentation for the tractor purchase and paving project provided by the SAU and maintained by the Department do not demonstrate that these reimbursements are a reasonable use of funds consistent with the purpose of ESF. In addition, utility bills such as oil and electricity are routine costs that are supported by a SAU’s annual operating budget, and these reimbursements are not consistent with the purpose of ESF. OSA selected a non-statistical random sample. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of established policies and procedures to ensure that only necessary expenditures are charged to the Federal program • Misinterpretation of Federal regulations Effect: • Noncompliance with Federal regulations • Known questioned costs • Potential future questioned costs and disallowances Recommendation: We recommend that the Department review all expenditures reimbursed using ESF to ensure that only allowable costs are charged to the Federal program. Expenditures that do not meet ESF criteria for allowability should be transferred out of ESF. Corrective Action Plan: See F-28 Management’s Response: The Maine Department of Education (MDOE) disagrees with the identified questioned costs. The FERP utilized guidance provided by the U.S. Department of Education (grantor) and conferred in writing with Maine’s assigned U.S. Department of Education program officer throughout the Education Stabilization Fund application review process. The Maine Department of Education’s FERP provided the auditor with the grantor’s guidance which clearly states that the questioned costs were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Throughout the application review process, FERP utilized ESF federal statutory language and the grantor’s published guidance to determine allowability. Once funding applications were approved, SAUs requested reimbursement from the FERP for the approved costs outlined in the school administrative unit (SAU) application. The FERP reviewed SAU reimbursement requests and provided payment for approved expenses. The ESF costs outlined in this finding were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 Auditor’s Concluding Remarks: Documentation provided by the Department for the reimbursements totaling $161,468 did not provide adequate evidence that the expenditures were reasonable, necessary, and in line with the allowability criteria of ESF, as outlined below: • A $91,000 tractor purchase is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. While outdoor learning space may have been expanded in response to COVID-19, lawn mowing, snow removal, and outdoor maintenance are routine costs of the SAU. • A $47,500 paving project is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. There is no direct correlation between paving improvements and disinfecting and cleaning of buses. • $22,968 in oil and electricity bill reimbursements are not reasonable or necessary uses of funds in response to needs directly arising from the public health emergency. Utility bills are routine costs that are supported by a SAU’s annual operating budget. Federal guidance for the ESF program does not clearly state that the expenditures noted as questioned costs are allowable, reasonable, and necessary to prevent, prepare for, and respond to COVID-19. Furthermore, the Department did not provide grantor guidance to OSA as stated in Management’s Response. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Without documentation and evidence to substantiate that the expenditures are necessary and reasonable in response to needs directly arising from the public health emergency, OSA cannot determine that the reimbursements were consistent with the purpose of ESF; therefore, OSA continues to question the allowability of these costs. The finding remains as stated. (State Number: 23-1235-03)
(2023-066) Title: Internal control over ESF 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 Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425C 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 170 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. 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 provided the Office of the State Auditor (OSA) with all monthly reports submitted in FSRS during fiscal year 2023. The Department could not provide support that Education Stabilization Fund (ESF) subawards submitted in FSRS represented a complete record of all subawards required to be reported, as procedures to reconcile subaward activity and FSRS reporting were not in place. Additionally, in OSA’s test of 36 ESF subawards that exceeded the first-tier subaward threshold, 13 subawards listed an incorrect project description, which is considered a key data element of FFATA reporting. The reported projects associated with the subaward funding did not accurately describe subrecipient activities using Federal funds as required by Federal regulations. OSA selected a non-statistical random sample. Context: During fiscal year 2023, the Department reported 177 first-tier subawards totaling approximately $17 million to ESF subrecipients. All 177 subawards exceeded the first-tier subaward threshold for reporting in FSRS. Cause: • The Department does not have a process in place to ensure that ESF subaward information submitted to FSRS is complete. • Supervisory review did not detect or prevent the errors contained in ESF subaward project descriptions submitted to FSRS. Effect: Inaccurate or incomplete information may be and was reported to the Federal government. This information may be used for programmatic, policy or statistical purposes. Recommendation: We recommend that the Department enhance policies and procedures to ensure all subawards that meet or exceed the first-tier threshold are reported accurately, timely, and in accordance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. The Department has implemented a new procedure in FY24 to review project descriptions and reconcile subawards reported between USA Spending and Advantage. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1235-02)
(2023-067) Title: Internal control over ESF subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425R, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.313; 2 CFR 200.332 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. For equipment acquired with Federal funding, records must be maintained that include: • a description and identification number; • the source of funding, including the Federal Award Identification Number; • who holds title and the acquisition date; • the cost of the property, including the percentage of Federal participation in the project costs for the Federal award under which the property was acquired; • the location, use and condition; and • any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition: The Education Stabilization Fund (ESF) provides funding to school administrative units (SAUs) to purchase equipment for use in preventing, preparing for, or responding to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF, including planned equipment purchases. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for equipment purchases identified and approved in the application. All SAU equipment purchases reimbursed with ESF are subject to applicable inventory control, log maintenance, and disposition requirements consistent with Federal regulations for equipment and real property management. During fiscal year 2023, the Department did not have policies and procedures in place to track SAU equipment purchases reimbursed with ESF; therefore, the Department does not have assurance that: • a complete and accurate record of all equipment purchased with ESF funds was maintained by each SAU. • proper monitoring activities surrounding subrecipient compliance with Federal regulations for equipment and real property management were conducted. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be in compliance with equipment and real property management requirements. • Assets purchased with ESF funds may not be properly safeguarded or maintained. Recommendation: We recommend that the Department implement policies and procedures to ensure that a complete and accurate record of all equipment purchased under ESF is maintained by the Department and by each SAU. This record should be utilized during subrecipient monitoring activities to verify subrecipient compliance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. The Office of Federal Emergency Relief Programs has developed and will be implementing a procedure to maintain complete and accurate records of all equipment purchased with ESF by each SAU. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 (State Number: 23-1235-04)
(2023-067) Title: Internal control over ESF subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425R, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.313; 2 CFR 200.332 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. For equipment acquired with Federal funding, records must be maintained that include: • a description and identification number; • the source of funding, including the Federal Award Identification Number; • who holds title and the acquisition date; • the cost of the property, including the percentage of Federal participation in the project costs for the Federal award under which the property was acquired; • the location, use and condition; and • any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition: The Education Stabilization Fund (ESF) provides funding to school administrative units (SAUs) to purchase equipment for use in preventing, preparing for, or responding to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF, including planned equipment purchases. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for equipment purchases identified and approved in the application. All SAU equipment purchases reimbursed with ESF are subject to applicable inventory control, log maintenance, and disposition requirements consistent with Federal regulations for equipment and real property management. During fiscal year 2023, the Department did not have policies and procedures in place to track SAU equipment purchases reimbursed with ESF; therefore, the Department does not have assurance that: • a complete and accurate record of all equipment purchased with ESF funds was maintained by each SAU. • proper monitoring activities surrounding subrecipient compliance with Federal regulations for equipment and real property management were conducted. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be in compliance with equipment and real property management requirements. • Assets purchased with ESF funds may not be properly safeguarded or maintained. Recommendation: We recommend that the Department implement policies and procedures to ensure that a complete and accurate record of all equipment purchased under ESF is maintained by the Department and by each SAU. This record should be utilized during subrecipient monitoring activities to verify subrecipient compliance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. The Office of Federal Emergency Relief Programs has developed and will be implementing a procedure to maintain complete and accurate records of all equipment purchased with ESF by each SAU. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 (State Number: 23-1235-04)
(2023-067) Title: Internal control over ESF subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Commissioner’s Office Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425R, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.313; 2 CFR 200.332 The Department must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Department is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. For equipment acquired with Federal funding, records must be maintained that include: • a description and identification number; • the source of funding, including the Federal Award Identification Number; • who holds title and the acquisition date; • the cost of the property, including the percentage of Federal participation in the project costs for the Federal award under which the property was acquired; • the location, use and condition; and • any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. The Department must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition: The Education Stabilization Fund (ESF) provides funding to school administrative units (SAUs) to purchase equipment for use in preventing, preparing for, or responding to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF, including planned equipment purchases. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for equipment purchases identified and approved in the application. All SAU equipment purchases reimbursed with ESF are subject to applicable inventory control, log maintenance, and disposition requirements consistent with Federal regulations for equipment and real property management. During fiscal year 2023, the Department did not have policies and procedures in place to track SAU equipment purchases reimbursed with ESF; therefore, the Department does not have assurance that: • a complete and accurate record of all equipment purchased with ESF funds was maintained by each SAU. • proper monitoring activities surrounding subrecipient compliance with Federal regulations for equipment and real property management were conducted. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Subrecipients may not be in compliance with equipment and real property management requirements. • Assets purchased with ESF funds may not be properly safeguarded or maintained. Recommendation: We recommend that the Department implement policies and procedures to ensure that a complete and accurate record of all equipment purchased under ESF is maintained by the Department and by each SAU. This record should be utilized during subrecipient monitoring activities to verify subrecipient compliance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. The Office of Federal Emergency Relief Programs has developed and will be implementing a procedure to maintain complete and accurate records of all equipment purchased with ESF by each SAU. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 (State Number: 23-1235-04)
(2023-069) Title: Internal control over ICA program subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Immunization Cooperative Agreements (COVID-19) Assistance Listing Number: 93.268 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must: • include Federal award information in the subaward that enables subrecipients to identify the source of the Federal award, as well as certain subrecipient information. • evaluate each subrecipient’s risk of noncompliance with Federal regulations for the purposes of determining the appropriate level of subrecipient monitoring to be performed. • monitor the activities of the subrecipient as necessary to ensure that subawards are used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Condition: The Department is responsible for ensuring subrecipients comply with Federal requirements by: • reviewing subrecipient grant awards to ensure accurate Federal award identification information is included to allow subrecipients to accurately identify the source of the subawards; • utilizing risk evaluations to determine the appropriate level of monitoring activities to be performed that correspond to the results of those risk evaluations; and • performing ongoing monitoring activities to ensure that the subaward was used for authorized purposes and in compliance with Federal regulations. The Office of the State Auditor (OSA) tested compliance with subrecipient monitoring requirements for eight subrecipients and found that: • three subawards did not properly identify required Federal award information: o one subaward was missing the subrecipient’s Data Universal Numbering System (DUNS) number. o three subawards reported the wrong Assistance Listing Number and title. • two subrecipients were deemed “higher risk” after the Department performed a risk evaluation; however, the Department could not provide documentation to support that additional monitoring activities were performed in response to the “higher risk” designation. • 35 financial reports were required to be completed and submitted for fiscal year 2023 to ensure subawards are used for approved budgeted expenditures; however, 23 could not be provided. • 17 performance reports were required to be completed and submitted for fiscal year 2023 to ensure subaward performance goals are achieved; however, eight could not be provided. The Department could not provide any other documentation to support that subrecipient monitoring procedures to ensure that the subaward was used for authorized purposes occurred during fiscal year 2023. OSA selected a non-statistical random sample. Context: The Department provided $2.7 million to 37 Immunization Cooperative Agreements (ICA) program subrecipients in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Lack of ongoing subrecipient monitoring procedures could result in undetected subrecipient noncompliance. Recommendation: We recommend that the Department enhance policies and procedures to ensure that: • subaward agreements include all required information and are accurate; • risk evaluations are utilized to determine the appropriate level of monitoring activities to be performed; and • ongoing subrecipient monitoring is completed during the subaward and documented. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this Finding. Presently, the Department engages in at least monthly meetings with subrecipients during which quarterly progress reports, quarterly financial reports, and workplans are reviewed and assessed for compliance. The Department documents its review of subrecipients’ quarterly progress and financial reports in a quarterly review template. Additionally, the Department completes annual monitoring visits with subrecipients to monitor their compliance and documents findings during those visits in a sub monitoring visit template. The Department also meets on an as-needed basis with subrecipients to address emerging challenges and concerns and meet subrecipients’ technical assistance needs to support their compliance. Contact: Eden Silverthorne, Associate Director, Office of Population Health Equity, MeCDC, DHHS, 207-441-1090 (State Number: 23-1118-02)
(2023-069) Title: Internal control over ICA program subrecipient monitoring procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Immunization Cooperative Agreements (COVID-19) Assistance Listing Number: 93.268 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must: • include Federal award information in the subaward that enables subrecipients to identify the source of the Federal award, as well as certain subrecipient information. • evaluate each subrecipient’s risk of noncompliance with Federal regulations for the purposes of determining the appropriate level of subrecipient monitoring to be performed. • monitor the activities of the subrecipient as necessary to ensure that subawards are used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Condition: The Department is responsible for ensuring subrecipients comply with Federal requirements by: • reviewing subrecipient grant awards to ensure accurate Federal award identification information is included to allow subrecipients to accurately identify the source of the subawards; • utilizing risk evaluations to determine the appropriate level of monitoring activities to be performed that correspond to the results of those risk evaluations; and • performing ongoing monitoring activities to ensure that the subaward was used for authorized purposes and in compliance with Federal regulations. The Office of the State Auditor (OSA) tested compliance with subrecipient monitoring requirements for eight subrecipients and found that: • three subawards did not properly identify required Federal award information: o one subaward was missing the subrecipient’s Data Universal Numbering System (DUNS) number. o three subawards reported the wrong Assistance Listing Number and title. • two subrecipients were deemed “higher risk” after the Department performed a risk evaluation; however, the Department could not provide documentation to support that additional monitoring activities were performed in response to the “higher risk” designation. • 35 financial reports were required to be completed and submitted for fiscal year 2023 to ensure subawards are used for approved budgeted expenditures; however, 23 could not be provided. • 17 performance reports were required to be completed and submitted for fiscal year 2023 to ensure subaward performance goals are achieved; however, eight could not be provided. The Department could not provide any other documentation to support that subrecipient monitoring procedures to ensure that the subaward was used for authorized purposes occurred during fiscal year 2023. OSA selected a non-statistical random sample. Context: The Department provided $2.7 million to 37 Immunization Cooperative Agreements (ICA) program subrecipients in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Lack of ongoing subrecipient monitoring procedures could result in undetected subrecipient noncompliance. Recommendation: We recommend that the Department enhance policies and procedures to ensure that: • subaward agreements include all required information and are accurate; • risk evaluations are utilized to determine the appropriate level of monitoring activities to be performed; and • ongoing subrecipient monitoring is completed during the subaward and documented. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this Finding. Presently, the Department engages in at least monthly meetings with subrecipients during which quarterly progress reports, quarterly financial reports, and workplans are reviewed and assessed for compliance. The Department documents its review of subrecipients’ quarterly progress and financial reports in a quarterly review template. Additionally, the Department completes annual monitoring visits with subrecipients to monitor their compliance and documents findings during those visits in a sub monitoring visit template. The Department also meets on an as-needed basis with subrecipients to address emerging challenges and concerns and meet subrecipients’ technical assistance needs to support their compliance. Contact: Eden Silverthorne, Associate Director, Office of Population Health Equity, MeCDC, DHHS, 207-441-1090 (State Number: 23-1118-02)
(2023-071) Title: Internal control over ICA program cash management needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Administrative and Financial Services State Bureau: Health and Human Services Service Center Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Immunization Cooperative Agreements (COVID-19) Assistance Listing Number: 93.268 Federal Award Identification Number: See E-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; 31 CFR 205.33; State Administrative and Accounting Manual (SAAM) Section 50.40.80 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. 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. The Department must minimize the time between the drawdown of Federal funds and the disbursement of these funds for Federal program purposes. The timing and amount of fund transfers must be as close as administratively feasible to the Department’s actual cash outlay for program costs. Section 50.40.80 of the SAAM has defined administratively feasible as no more than seven business days. Condition: The Department of Health and Human Services’ Service Center (DHHS SC) is responsible for the drawdown of funds for the Immunization Cooperative Agreements (ICA) program. The DHHS SC requests Federal funds to pay for ICA program expenditures utilizing a system report of expenditures. This report includes both expenditures that have been paid and expenditures that are pending payment. Expenditures that are pending payment can take additional time to process. In the Office of the State Auditor’s (OSA) testing of 40 Federal drawdowns, three drawdowns of Federal funds for the ICA program were beyond the administratively feasible requirement for disbursement, ranging from 10 to 12 days after the receipt of Federal funds. OSA selected a judgmental and a non-statistical random sample. In addition, DHHS SC personnel did not take the existing cash balance into consideration when requesting Federal funds for the ICA program for the first two months of fiscal year 2023, resulting in an excess cash balance. Context: In fiscal year 2023, there were 177 Federal grant drawdowns totaling approximately $10 million for the ICA program. The three drawdowns beyond the administratively feasible requirement for disbursement totaled $215,595. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • The Federal government may impose more stringent program-specific cash management requirements based on noncompliance. Recommendation: We recommend that the DHHS SC develop and implement policies and procedures to ensure that Federal cash is requested based on immediate cash needs which includes consideration of existing cash balances. We also recommend that the DHHS SC review and revise current policies and include guidance for drawing Federal funds to exclude pending expenditures to ensure that Federal cash is requested based on immediate cash needs. Corrective Action Plan: See F-30 Management’s Response: The Department and its Financial Service Center agree with this finding. Policies and procedures will be reviewed for CMIA, draw procedures and reconciliations. The DHHS Financial Service Center will work to obtain and/or increase estimated revenue within the ICA appropriations. With an approval of estimated revenue, expenses will process first, and federal cash will be drawn after, reducing the risk of CMIA noncompliance as Federal cash will be instantly replenishing the account rather than waiting for invoices to process. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1118-01)
(2023-071) Title: Internal control over ICA program cash management needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Administrative and Financial Services State Bureau: Health and Human Services Service Center Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Immunization Cooperative Agreements (COVID-19) Assistance Listing Number: 93.268 Federal Award Identification Number: See E-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; 31 CFR 205.33; State Administrative and Accounting Manual (SAAM) Section 50.40.80 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. 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. The Department must minimize the time between the drawdown of Federal funds and the disbursement of these funds for Federal program purposes. The timing and amount of fund transfers must be as close as administratively feasible to the Department’s actual cash outlay for program costs. Section 50.40.80 of the SAAM has defined administratively feasible as no more than seven business days. Condition: The Department of Health and Human Services’ Service Center (DHHS SC) is responsible for the drawdown of funds for the Immunization Cooperative Agreements (ICA) program. The DHHS SC requests Federal funds to pay for ICA program expenditures utilizing a system report of expenditures. This report includes both expenditures that have been paid and expenditures that are pending payment. Expenditures that are pending payment can take additional time to process. In the Office of the State Auditor’s (OSA) testing of 40 Federal drawdowns, three drawdowns of Federal funds for the ICA program were beyond the administratively feasible requirement for disbursement, ranging from 10 to 12 days after the receipt of Federal funds. OSA selected a judgmental and a non-statistical random sample. In addition, DHHS SC personnel did not take the existing cash balance into consideration when requesting Federal funds for the ICA program for the first two months of fiscal year 2023, resulting in an excess cash balance. Context: In fiscal year 2023, there were 177 Federal grant drawdowns totaling approximately $10 million for the ICA program. The three drawdowns beyond the administratively feasible requirement for disbursement totaled $215,595. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • The Federal government may impose more stringent program-specific cash management requirements based on noncompliance. Recommendation: We recommend that the DHHS SC develop and implement policies and procedures to ensure that Federal cash is requested based on immediate cash needs which includes consideration of existing cash balances. We also recommend that the DHHS SC review and revise current policies and include guidance for drawing Federal funds to exclude pending expenditures to ensure that Federal cash is requested based on immediate cash needs. Corrective Action Plan: See F-30 Management’s Response: The Department and its Financial Service Center agree with this finding. Policies and procedures will be reviewed for CMIA, draw procedures and reconciliations. The DHHS Financial Service Center will work to obtain and/or increase estimated revenue within the ICA appropriations. With an approval of estimated revenue, expenses will process first, and federal cash will be drawn after, reducing the risk of CMIA noncompliance as Federal cash will be instantly replenishing the account rather than waiting for invoices to process. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1118-01)
(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)
(2023-073) Title: Internal control over ELC program reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Assistance Listing Number: 93.323 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 200.302; 2 CFR 200.329 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with reporting requirements. The Department must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Condition: The purpose of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program is to protect public health and safety by enhancing the capacity of public health agencies to effectively detect, respond to, prevent, and control known and emerging infectious diseases. The Maine Center for Disease Control & Prevention (MeCDC) administers the ELC program and is responsible for the preparation, accuracy, and submission of financial and performance reports to the Federal awarding agency. Financial Reports The Office of the State Auditor (OSA) reviewed seven of the 33 financial reports due in fiscal year 2023 and found that adequate documentation to support that four of the reports had been reviewed prior to submission could not be provided. OSA selected a non-statistical random sample. Performance Reports The Department was required to submit performance reports for three grants during fiscal year 2023. MeCDC provided the submitted reports; however, adequate supporting documentation could not be provided. Context: During fiscal year 2023, 33 financial reports and performance reports for three grants were required to be filed for the ELC program. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Without documentation in support of ELC program reporting requirements, the timeliness and veracity of procedures to ensure compliance cannot be verified; therefore, incorrect or incomplete data may be reported to the Federal government Recommendation: We recommend that MeCDC enhance policies and procedures to ensure that documentation to support the accuracy and completeness of performance and financial reports is retained to demonstrate compliance with Federal reporting requirements. Corrective Action Plan: See F-31 Management’s Response: The Department agrees with this finding. With each quarterly financial reporting due on the 20th of each subsequent month (November, February, May, and August), the Maine CDC will submit quarterly financial reports for internal review by the 10th of the pertinent month. The internal reviewer will have until the 18th to review and submit corrections, for reporting to be inputted into CAMP. A confirmatory email for the process will be issued to record the examination of financial reporting. For performance reporting, quantitative data is pulled for each report, however data cleaning of the quantitative data is ongoing and a requirement from the Federal CDC. Data pulled for each report will only be accurate at the point in time when the data is pulled. Each year's data is not finalized until six plus months after the year ends. The Federal CDC does not require past reports to be reposted and updated as data cleaning occurs after the initial report is filed. For performance reporting of qualitative data, each team holds a quarterly meeting to review the milestones and provide updates. These meetings will now be recorded and will be available to audit upon request. For any qualitative milestone where progress is made on any given period, the Maine CDC will ensure there is a documented note associated with the percentage completeness selected to further document the recorded value. Contact: Sara Robinson, Infectious Disease Program Manager, DHHS, 207-287-4610 (State Number: 23-1156-02)
(2023-073) Title: Internal control over ELC program reporting needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Assistance Listing Number: 93.323 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 200.302; 2 CFR 200.329 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with reporting requirements. The Department must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Condition: The purpose of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program is to protect public health and safety by enhancing the capacity of public health agencies to effectively detect, respond to, prevent, and control known and emerging infectious diseases. The Maine Center for Disease Control & Prevention (MeCDC) administers the ELC program and is responsible for the preparation, accuracy, and submission of financial and performance reports to the Federal awarding agency. Financial Reports The Office of the State Auditor (OSA) reviewed seven of the 33 financial reports due in fiscal year 2023 and found that adequate documentation to support that four of the reports had been reviewed prior to submission could not be provided. OSA selected a non-statistical random sample. Performance Reports The Department was required to submit performance reports for three grants during fiscal year 2023. MeCDC provided the submitted reports; however, adequate supporting documentation could not be provided. Context: During fiscal year 2023, 33 financial reports and performance reports for three grants were required to be filed for the ELC program. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: Without documentation in support of ELC program reporting requirements, the timeliness and veracity of procedures to ensure compliance cannot be verified; therefore, incorrect or incomplete data may be reported to the Federal government Recommendation: We recommend that MeCDC enhance policies and procedures to ensure that documentation to support the accuracy and completeness of performance and financial reports is retained to demonstrate compliance with Federal reporting requirements. Corrective Action Plan: See F-31 Management’s Response: The Department agrees with this finding. With each quarterly financial reporting due on the 20th of each subsequent month (November, February, May, and August), the Maine CDC will submit quarterly financial reports for internal review by the 10th of the pertinent month. The internal reviewer will have until the 18th to review and submit corrections, for reporting to be inputted into CAMP. A confirmatory email for the process will be issued to record the examination of financial reporting. For performance reporting, quantitative data is pulled for each report, however data cleaning of the quantitative data is ongoing and a requirement from the Federal CDC. Data pulled for each report will only be accurate at the point in time when the data is pulled. Each year's data is not finalized until six plus months after the year ends. The Federal CDC does not require past reports to be reposted and updated as data cleaning occurs after the initial report is filed. For performance reporting of qualitative data, each team holds a quarterly meeting to review the milestones and provide updates. These meetings will now be recorded and will be available to audit upon request. For any qualitative milestone where progress is made on any given period, the Maine CDC will ensure there is a documented note associated with the percentage completeness selected to further document the recorded value. Contact: Sara Robinson, Infectious Disease Program Manager, DHHS, 207-287-4610 (State Number: 23-1156-02)
(2023-074) Title: Internal control over ELC program cash management 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 Health and Human Services Assistance Listing Title: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Assistance Listing Number: 93.323 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; 31 CFR 205.33; State Administrative and Accounting Manual (SAAM) Section 50.40.80 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 minimize the time between the drawdown of Federal funds and the disbursement of these funds for Federal program purposes. The timing and amount of fund transfers must be as close as administratively feasible to the Department’s actual cash outlay for program costs. Section 50.40.80 of the SAAM has defined administratively feasible as no more than seven business days. Condition: The Department of Health and Human Services’ (DHHS) Service Center (SC) provides services including human resources, payroll, accounting, and finance to programs administered by DHHS, including the Epidemiology and Laboratory for Infectious Diseases (ELC) program. The DHHS SC requests Federal funds to reimburse ELC program expenditures utilizing a system report of expenditures. This report includes both expenditures that have been paid and expenditures that are pending payment. Expenditures that are pending payment can take a significant amount of time to process. In the Office of the State Auditor’s (OSA) testing of 51 Federal drawdowns, four drawdowns of Federal funds for the ELC program were beyond the administratively feasible requirement for disbursement. Disbursements ranged from 8 to 11 days after the receipt of Federal funds. OSA selected a non-statistical random sample. Context: In fiscal year 2023, there were 211 Federal grant drawdowns for the ELC program totaling $39.4 million. The four drawdowns beyond the administratively feasible requirement for disbursement totaled $1.1 million. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • The Federal government may impose more stringent program-specific cash management requirements based on noncompliance. Recommendation: We recommend that the DHHS SC review and revise current policies and include guidance for drawing Federal funds to exclude pending expenditures to ensure that Federal cash is requested based on immediate cash needs. Corrective Action Plan: See F-31 Management’s Response: The DHHS and the DHHS Financial Service Center agree with this finding. As of July 1st, 2023, a Treasury State Agreement was put in place and estimated revenue was established for all appropriations related to the ELC program. Federal cash requests are now following the Treasury State Agreement and funds are being drawn weekly based upon actual expenditures. The DHHS Financial Service Center will update procedures for CMIA, Federal cash requests and reconciliations related to the ELC program to include the guidance of the Treasury State Agreement and weekly draw process. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1156-01)
(2023-074) Title: Internal control over ELC program cash management 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 Health and Human Services Assistance Listing Title: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Assistance Listing Number: 93.323 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; 31 CFR 205.33; State Administrative and Accounting Manual (SAAM) Section 50.40.80 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 minimize the time between the drawdown of Federal funds and the disbursement of these funds for Federal program purposes. The timing and amount of fund transfers must be as close as administratively feasible to the Department’s actual cash outlay for program costs. Section 50.40.80 of the SAAM has defined administratively feasible as no more than seven business days. Condition: The Department of Health and Human Services’ (DHHS) Service Center (SC) provides services including human resources, payroll, accounting, and finance to programs administered by DHHS, including the Epidemiology and Laboratory for Infectious Diseases (ELC) program. The DHHS SC requests Federal funds to reimburse ELC program expenditures utilizing a system report of expenditures. This report includes both expenditures that have been paid and expenditures that are pending payment. Expenditures that are pending payment can take a significant amount of time to process. In the Office of the State Auditor’s (OSA) testing of 51 Federal drawdowns, four drawdowns of Federal funds for the ELC program were beyond the administratively feasible requirement for disbursement. Disbursements ranged from 8 to 11 days after the receipt of Federal funds. OSA selected a non-statistical random sample. Context: In fiscal year 2023, there were 211 Federal grant drawdowns for the ELC program totaling $39.4 million. The four drawdowns beyond the administratively feasible requirement for disbursement totaled $1.1 million. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • The Federal government may impose more stringent program-specific cash management requirements based on noncompliance. Recommendation: We recommend that the DHHS SC review and revise current policies and include guidance for drawing Federal funds to exclude pending expenditures to ensure that Federal cash is requested based on immediate cash needs. Corrective Action Plan: See F-31 Management’s Response: The DHHS and the DHHS Financial Service Center agree with this finding. As of July 1st, 2023, a Treasury State Agreement was put in place and estimated revenue was established for all appropriations related to the ELC program. Federal cash requests are now following the Treasury State Agreement and funds are being drawn weekly based upon actual expenditures. The DHHS Financial Service Center will update procedures for CMIA, Federal cash requests and reconciliations related to the ELC program to include the guidance of the Treasury State Agreement and weekly draw process. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1156-01)
(2023-087) Title: Internal control over DHHS allocated costs needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Health and Human Services Service Center Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Title IV-E Prevention Program Foster Care – Title IV-E (COVID-19) Assistance Listing Number: 93.472; 93.658 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 200.403; Department of Health and Human Services’ Cost Allocation Plan 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. Some accounts include costs that benefit multiple programs (cost pool accounts). A Random Moment Time Study (RMTS) allocation method is used to allocate certain Office of Child and Family Services cost pool accounts. RMTS is used to identify time spent on Title IV-E programs and time reimbursable for child welfare system operational costs. Condition: A Cost Allocation Plan (CAP) is used when a cost cannot be identified to a particular cost objective (direct expensed). The Department of Health and Human Services’ (DHHS) CAP is a written summary that documents how DHHS allocates cost pool accounts across multiple programs, including approved allocation methods by cost pool account, and is approved by the Federal government. The Office of the State Auditor (OSA) identified that the Foster Care – Title IV-E program’s allocated costs decreased by 31 percent in fiscal year 2023. In response to OSA’s inquiry, the Department acknowledged that the program was overcharged by $2.7 million due to incorrect RMTS statistic information that was provided beginning in October 2021 through April 2023. These costs should have been charged to ALN 93.472 Title IV-E Prevention Program. During the last quarter of fiscal year 2023, the Department initiated corrective action and appropriately transferred the unallowable costs that were incurred during fiscal year 2023 from the Foster Care – Title IV-E program to the Title IV-E Prevention Program. Context: Of the $80.2 million in costs allocated through the DHHS CAP, $11.9 million was correctly charged to the Foster Care – Title IV-E program and $4.9 million was correctly charged to the Title IV-E Prevention Program during fiscal year 2023. Cause: • Lack of adequate procedures to prevent, or detect and correct, errors timely • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances if unallowable costs are charged to the wrong Federal program and not detected timely • Noncompliance with Federal requirements Recommendation: We recommend that the Department implement additional procedures to validate the accuracy of changes to the DHHS CAP before implementation and to enhance monitoring procedures over allocated costs. This will ensure that Federal programs are appropriately charged through the DHHS CAP in accordance with Federal regulations. Corrective Action Plan: See F-36 Management’s Response: The DHHS and DHHS Financial Service Center agree with this finding. The DHHS Financial Service Center and the Office of Child and Family Services will implement additional procedures to validate the accuracy of OCFS applicable changes to the DHHS CAP by December 31, 2024. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1103-01)
(2023-075) Title: Internal control over payments made to and on behalf of TANF clients needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $4,721 Likely Questioned Costs: $279,992; likely questioned costs were projected by dividing the identified known overpayment in our sample by total payments tested to establish an error rate, then applying that error rate to total payments to Temporary Assistance for Needy Families (TANF) clients for services and payments to providers on behalf of TANF clients in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 263.11 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must use Federal TANF funds for expenditures that are reasonably calculated to accomplish the purposes of TANF. Use of funds in violation of this is considered misuse of funds. Condition: The Department issues TANF payments directly to a TANF client for various items and services. The Department also issues TANF payments directly to providers on behalf of TANF clients for services rendered such as child care and transportation. The Office of the State Auditor (OSA) tested 60 payments and found that: • one payment issued in September 2022 underpaid a provider by $1 for Transitional Child Care (TCC). Upon further review, OSA found an additional $666 overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $665. Both the underpayment and overpayment were identified by OSA during audit testing. • one payment issued in November 2022 correctly paid a provider $154 for TCC. Upon further review, OSA found that the Department received income documentation for the client after the payment was made which would decrease future weekly TCC payments. The Department did not recalculate the TCC payment as required, and as a result, an additional $1,020 was overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $1,020. The overpayment was identified by OSA during audit testing. • one payment issued in November 2022 overpaid a provider by $7 for TCC. Upon further review, OSA found an additional $210 overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $217. The overpayment was identified by OSA during testing. • one payment issued in January 2023 overpaid a TANF client a total of $247 for clothing. An advance allowance of $300 was issued to the TANF client, and the TANF client submitted receipts substantiating purchases of $53. The Department sent a letter to the client requesting receipts for the unsubstantiated amount but did not establish an overpayment. OSA is questioning costs totaling $247. The overpayment was identified by OSA during testing. • one payment issued in March 2023 correctly paid a provider $13 for TCC. Upon further review, OSA found that the Department received income documentation for the client after the payment was made which would decrease future weekly TCC payments. The Department did not recalculate the TCC payment as required and as a result, an additional $156 was overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $156. The overpayment was identified by OSA during audit testing. • one payment issued in April 2023 correctly paid a provider $138 for TCC. Upon further review, OSA found that the Department received income documentation for the client after the payment was made which would decrease future weekly TCC payments. The Department did not recalculate the TCC payment as required and as a result, an additional $88 was overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $88. The overpayment was identified by OSA during audit testing. In addition, Department controls identified the following overpayments. Because these payments were not in accordance with Federal regulations and the Department has not recouped the funds, OSA is questioning the costs: • one payment issued in September 2022 overpaid a TANF client by $150 for clothing. An advance allowance of $150 was issued to the TANF client; however, the TANF client did not submit a receipt substantiating the purchase as required. The Department identified the overpayment in March 2023, thus OSA is questioning costs totaling $150. • one payment issued in September 2022 overpaid a provider by $104 for TCC. Upon further review, OSA found an additional $2,074 overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $2,178. The Department identified the overpayment in October 2022. OSA selected a non-statistical random sample. Context: In fiscal year 2023, payments to TANF clients for services other than direct cash benefits and payments to providers on behalf of TANF clients totaled $8.3 million. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department: • implement additional procedures to ensure that payments made to TANF clients and providers are accurate, allowable, and adequately documented; • increase monitoring procedures over these payments; and • establish recoupments of overpayments in instances where they have not yet been established. Corrective Action Plan: See F-31 Management’s Response: OFI disagrees with this finding. OSA’s interpretation of federal regulation regarding the recoupment of overpaid funds is incorrect, and benefit overpayments are identified and processed by OFI in compliance with federal regulation and policy. Overpayments are required to be recouped in the shortest timeframe possible, but the recoupment amount cannot exceed the standards as set by policy. Neither state policy nor federal regulation requires an overpayment to be recouped within the same state fiscal year it is identified, so it was not appropriate for OSA to include as questioned costs on that basis the two cases where recoupment did not occur in the same fiscal year that the overpayment was established. Further, OFI disputes how OSA calculated the questioned costs. Three of the payments tested by OSA were found to be correct at the time of issuance. OSA then reviewed all payments during the state fiscal year for the three cases and stated that parent fees should have been adjusted based on documentation in DocuWare. Transitional Child Care does not require changes in income to be reported during the certification period unless the gross income exceeds 250% of the federal poverty level (MPAM, Ch. V, A, (6)), and adjustment of the parent fees were not required for these cases. They should not be included in the list of exceptions. While OSA cites MPAM, Ch. V, A (6), “TCC payments remain constant until a redetermination is completed, or until the recipient or child care provider reports a change that affects the amount of TCC benefits (emphasis added)” the reported change did not affect the amount of TCC benefits. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Office for Family Independence (OFI) has misconstrued the finding. OSA does not expect the Department to recoup funds within the year they are identified. OSA does expect that when the Department identifies overpayments, recoupments are established for those overpayments. While OSA agrees that the Department identified two of the eight overpayments as noted in the finding, OFI did not take action and appropriately establish a related recoupment to ensure that funds would be recovered. Had appropriate action been taken by OFI, OSA would not have questioned the costs. Regarding the three cases “found to be correct at the time of issuance” in relation to the calculation of questioned costs: • OSA understands TCC payments do not require changes in income to be reported during the certification period unless the gross income exceeds 250 percent of the Federal poverty level; however, this is the reporting responsibility of the client, not the State. • Management’s Response cites Ch. V, A, (6) of the Department’s Maine Public Assistance Manual (MPAM) which states TCC payments remain constant until a redetermination is completed, or until the recipient or childcare provider reports a change that affects the amount of TCC benefits. For the three cases, the recipient self-reported a change in income. The Department did not recalculate the TCC payment, resulting in the childcare provider being overpaid during fiscal year 2023. The finding remains as stated. (State Number: 23-1111-03)
(2023-076) Title: Internal control over Income Eligibility and Verification System procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 205.56 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to comply with Federal Income Eligibility and Verification System (IEVS) exchange rules and regulations in accordance with program agreements. The Department is required to resolve all discrepancies identified through IEVS reports within 45 days of receipt. Condition: IEVS is used to exchange information among State and Federal agencies to verify various information needed to determine eligibility for Federal financial assistance. This information is updated in the Automated Client Eligibility System (ACES) to ensure eligibility determinations are made based on current information. IEVS generates various discrepancy reports on a weekly, monthly, and quarterly basis. The Department is required to resolve all discrepancies identified through IEVS reports within 45 days of receipt. Federal guidance over the Temporary Assistance for Needy Families (TANF) program outlines audit procedures to ensure that the State has established and implemented the required IEVS exchange for data matching and verification of such data. These procedures include testing a sample of TANF cases subject to IEVS. The Office of the State Auditor (OSA) requested a list of TANF cases subject to IEVS for testing purposes; in response, the Department provided OSA with all IEVS discrepancy reports run in fiscal year 2023. The reports provided by the Department contain cases for TANF, SNAP, and Medicaid/Medicare, and do not have a specific Federal program indicator. The Department was unable to provide OSA with a report that isolates TANF-specific cases subject to IEVS. Without a population of TANF-specific cases for fiscal year 2023, OSA is unable to verify that the program is in compliance with Federal requirements. Context: 224 IEVS reports are required to be generated annually. The number of discrepancies on each report can vary from zero to approximately 20,000. The Department cannot determine the number of discrepancies related to TANF. Cause: • Lack of resources • Lack of adequate procedures to ensure that an accurate report of TANF cases subject to IEVS can be provided Effect: • IEVS information may not be updated timely in ACES, which could result in incorrect eligibility determinations. • Failure to maintain documentation to support compliance with required TANF exchange rules may result in the U.S. Department of Health and Human Services penalizing the State up to two percent of the grant award. Recommendation: In October 2023, the Department updated procedures and added a Federal program indicator field to the IEVS discrepancy reports which will enable the Department to isolate TANF-specific cases subject to IEVS. Therefore, we recommend that the Department monitor newly employed procedures to ensure that they are properly implemented and IEVS discrepancy reports can be provided for TANF-specific cases. Corrective Action Plan: See F-32 Management’s Response: The Department disagrees with this finding. The Office for Family Independence (OFI) has conducted the required IEVS eligibility verifications. Additionally, sufficient evidence of these efforts has been provided to the Office of the State Auditor so that audit procedures can be performed in accordance with Federal regulations. The finding does not articulate any deficiency in OFI policy or practice with respect to federal IEVS requirements. The Office of the State Auditor (OSA) takes exception with OFI’s identified population from which to test a sample. It is our position that OSA could have identified a complete population to test from the information that OFI provided this year and last year. That information included: • A report of all TANF cases “subject to the IEVS requirement” in the audit period and • All the IEVS reports in our possession, which would allow OSA to cross-reference whether sampled TANF cases were identified in a discrepancy report and should have had IEVS-related activity reflected in ACES during the audit period. We also provided access to ACES, which would allow OSA to review sampled TANF cases in detail to determine whether IEVS activity occurred appropriately on the case during the audit period. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207- 592-1481 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish and maintain effective internal control over Federal awards. 45 CFR 205.56 requires the Department to comply with Federal IEVS exchange rules and regulations. The Department did not demonstrate effective internal control over the TANF program or provide documentation to support required components for participation in IEVS. Federal guidance requires OSA to develop audit procedures to test a sample of TANF cases subject to IEVS. OFI could not provide a population of TANF cases subject to IEVS in order to draw a sample for testing purposes. In response to the materials provided to OSA by OFI: • “A report of all TANF cases subject to the IEVS requirement in the audit period.” This list includes all TANF eligible clients for fiscal year 2023 subject to IEVS; however, not all TANF eligible clients are reported on IEVS discrepancy reports. Therefore, this listing does not isolate the correct population and cannot be utilized for audit testing. • “All the IEVS reports in our possession, which would allow OSA to cross-reference whether sampled TANF cases were identified in a discrepancy report and should have had IEVS-related activity reflected in ACES during the audit period.” As stated in the Condition, the IEVS discrepancy reports provided by the Department contain cases for Medicaid, SNAP, and TANF, and do not have a specific Federal program indicator to delineate TANF-specific cases. It is unreasonable for OFI to suggest that OSA crosswalk information to prepare a population for audit testing as this would impair auditor independence. Auditor independence is defined in and required by Government Auditing Standards issued by the Comptroller General of the United States. The reports provided do not identify the correct population and cannot be utilized for audit testing. • “We also provided access to ACES, which would allow OSA to review sampled TANF cases in detail to determine whether IEVS activity occurred appropriately on the case during the audit period.” This provides OSA with access to ACES for audit testing purposes; however, as noted above, OSA was not provided the information requested in order to complete required audit testing. OFI is responsible for coordinating data exchanges with Federally-assisted benefit programs and requesting and using income and benefit information when making TANF eligibility determinations. Without a complete and accurate population of TANF cases subject to IEVS, OFI cannot substantiate that: • IEVS data was utilized to appropriately update all TANF cases subject to IEVS in accordance with 45 CFR 205.56; • eligibility determinations for the TANF program are accurate; and • management is properly overseeing compliance with 45 CFR 205.56. Therefore, OFI’s inability to identify and isolate TANF cases subject to IEVS corroborates a deficiency in internal control over compliance with Federal IEVS exchange rules and regulations. Additionally, though the Department has disagreed with the finding, the Department began implementing corrective action in October 2023. The finding remains as stated. (State Number: 23-1111-01)
(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)
(2023-078) Title: Internal control over TANF subrecipient risk evaluation procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Office of Child and Family Services Division of Contract Management Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Subrecipient monitoring Type of Finding: Material weakness Material noncompliance Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.332 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in 2 CFR 200.332. Condition: The Department has established subrecipient monitoring procedures depending on whether the subaward is competitively bid or not. If a subaward is competitively bid, the Department’s Division of Contract Management’s (DCM) Competitive Procurement Unit seeks input from the Department of Health and Human Services’ Service Center, the Department’s Division of Audit, and DCM’s Contracts Unit regarding known issues with the provider who submitted the bid. Those responses are collected and provided to the evaluation team which consists of various program personnel. The subaward agreement is then drafted and the level of subrecipient monitoring is included in the agreement. If a subaward is not competitively bid, the subaward agreement is drafted based on the level of subrecipient monitoring that the Department has established for the provided services. The Office of the State Auditor (OSA) selected seven TANF subrecipients, which included seven subawards that were competitively bid and six subawards that were not competitively bid and found that for: • three competitively bid subawards, DCM provided evidence to support that feedback was solicited from other Bureaus for any known issues or prior noncompliance; however, evidence could not be provided to support the level of subrecipient monitoring that was completed. • four competitively bid subawards, DCM could not provide evidence to support that feedback was solicited from other Bureaus for any known issues or prior noncompliance. In addition, evidence could not be provided to support the level of subrecipient monitoring that was completed. • six non-competitively bid subawards, evidence could not be provided to support the level of subrecipient monitoring that was completed. OSA selected a non-statistical random sample. Context: The Department provided $31.7 million from a total of $91.8 million to TANF subrecipients during fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Without a documented process, subrecipient risk evaluation procedures may not be consistently followed, and documentation may not be adequately maintained. • Subrecipients that are deemed higher risk may not be monitored on a more frequent basis. Conversely, subrecipients that are deemed lower risk may not be monitored on a less frequent basis, which would free resources and time to dedicate towards other higher risk subrecipients. Recommendation: We recommend that the Department: • document procedures that outline the collaborative process with all Bureaus. • implement policies and procedures that require evaluation of each subrecipient’s risk of noncompliance specifically for the purposes of determining the appropriate subrecipient monitoring to be performed. This will ensure subrecipients are monitored appropriately based on risk designation. Corrective Action Plan: See F-33 Management’s Response: The Department disagrees with this finding. The Department has subrecipient monitoring procedures for all of its subrecipients whether they were competitively bid or not. The first assessment of risk, as noted in the finding, is when a subaward is competitively bid. Secondly, another risk assessment built into the Maine Uniform Accounting and Auditing Practices for Community Agencies (MAAP), requires higher risk subrecipients to undergo a higher level of testing. Additionally, there are audit and review requirements at a much lower threshold than that of the Uniform Guidance (UG). Finally, the Social Service Unit of the Division of Audit performs a risk assessment and tests transactions for those subrecipients that have been determined to be higher risk. The Department's subrecipient monitoring procedures ensures that we comply with the UG 200.332(d) Pass-through entity (PTE) monitoring of the subrecipient must include: 1) Review of financial and performance reports. 2) Following-up and ensuring that subrecipients take timely and appropriate action on all deficiencies. 3) Issues management decisions. 4) PTE is responsible for resolving audit findings specifically related to the subaward. Based on the Department's MAAP rules we ensure we comply with UG 200.332(e) Depending on the PTE's assessment of risk, the following tools may be useful: 1) Training and technical assistance. 2) On-site reviews. 3) Arranging for agreed upon procedures. The Department covers #3 by ensuring that all of our subrecipients have a requirement to submit to the Department a/an Audit, Review or Schedule of Expenditures of Department Awards (SEDA). Contact: Jim Lopatosky, Director, Division of Contract Management, DHHS, 207-287-5075 Auditor’s Concluding Remarks: The Department has misinterpreted the Federal regulation cited in this finding. The Department has responded to 2 CFR 200.332(d), which identifies monitoring procedures to be conducted during the subrecipient award period. OSA audited compliance with this during-the-award monitoring requirement and did not identify deficiencies. The Federal regulation that the Department failed to meet is 2 CFR 200.332(b). This regulation identifies procedures to be performed prior to monitoring procedures in order to determine the level of monitoring required for each subrecipient. 2 CFR 200.332(b) states that the Department must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring, which may include consideration of factors such as: • the subrecipient’s prior experience with the same or similar subawards; • the results of previous audits including whether or not the subrecipient receives a Single Audit, and the extent to which the same or similar subaward has been audited as a major program; • whether the subrecipient has new personnel or new or substantially changed systems; and • the extent and results of Federal awarding agency monitoring. The Department did not provide any documentation to support that monitoring procedures performed were based on an evaluation of the subrecipient’s risk of noncompliance. The finding remains as stated. (State Number: 23-1111-05)
(2023-080) Title: Internal control over TANF client child support sanction procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 264.30; 42 USC 608(a)(2) The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. If the Department determines that an individual is not cooperating with child support enforcement requirements, the Department is required to sanction the individual by deducting an amount equal to not less than 25 percent from the Temporary Assistance for Needy Families (TANF) assistance that would otherwise be provided to the family of the individual and may deny the family any TANF assistance. Condition: The Department’s Division of Support Enforcement and Recovery (DSER) is responsible for enforcing child support requirements. DSER staff initiate a sanction memo in the Child Support Enforcement of Maine (CSEME) system indicating the date of noncooperation, and send email notifications to TANF personnel when individuals not cooperating with child support enforcement requirements are identified. If TANF personnel determine that the individual needs to be sanctioned after reviewing the individual’s case, they will process the sanction request in the Automated Client Eligibility System (ACES). Federal guidance requires the Office of the State Auditor (OSA) to develop audit procedures in order to test a sample of cases referred to TANF by DSER. OSA requested a list of sanction requests from DSER for testing purposes. In response to this request, DSER provided a report of all sanction memos initiated in the CSEME system with dates of noncooperation during fiscal year 2023. Because OSA is also required to evaluate the report to ensure that the population provided is accurate and complete, a report from TANF personnel of DSER noncooperation sanctions applied during fiscal year 2023 was also requested and a cross-match was performed. OSA identified 128 sanctions on the TANF-provided report that were not included on the DSER-provided report. OSA selected a sample of 15 of these discrepancies for further review and identified the following exceptions: • eight cases where a sanction memo initiated during fiscal year 2023 was provided to TANF; however, these eight cases were not included on the DSER-provided report. • two cases where TANF received an email referral from DSER; however, these two cases were not included on the DSER provided report. • two cases where OFI stated the child support noncooperation sanction was initiated by TANF personnel; however, ACES case notes for both cases state that email referrals from DSER requesting child support noncooperation sanctions were received. Both cases were not included on the DSER provided report. As evidenced above, if OSA had relied on the DSER-provided report for testing purposes, an unknown number of sanction requests would have been omitted to ensure compliance with child support sanction requirements. Therefore, OSA cannot rely on the population provided by the Department for audit testing as the population is not accurate and complete. OSA is unable to test to ensure the Department is in compliance with child support sanction requirements. OSA selected a non-statistical random sample. Context: DSER provided a report of 455 sanction requests initiated in fiscal year 2023. The number of sanction requests that were made but omitted from the DSER report is unknown. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliant clients may be paid benefits that they are not entitled to receive. • Failure to maintain appropriate documentation to demonstrate compliance with Federal program sanction requirements may result in the U.S. Department of Health and Human Services penalizing the State for up to five percent of the grant award. Recommendation: We recommend that the Department establish procedures to ensure all child support sanction requests can be provided so that audit procedures can be performed in accordance with Federal regulations. We further recommend that the Department increase oversight to ensure compliance with Federal requirements. Corrective Action Plan: See F-33 Management’s Response: The Department disagrees with this finding. The audit objective identified in the Compliance Supplement is to “Determine whether, after notification by the state Title IV-D agency, the TANF agency has taken necessary action to reduce or deny TANF assistance.” One of the two suggested audit procedures is to “Test a sample of cases referred by the Title IV-D agency to the TANF agency to ascertain if benefits were reduced or denied as required.” The Department spent a lot of time and effort attempting to validate for OSA that it had a testable population, and the Department believes that the Office of State Auditor can perform this procedure either with the DSER-provided report of referrals or with that report in conjunction with the additional material the Department has pulled and analyzed for OSA. In the absence of that review nothing in the Department’s records, data, or discussions with OSA could reasonably be interpreted to suggest a “significant deficiency” in its Internal Controls over this aspect of the TANF program. There has not been any evidence that referrals made from DSER to OFI are getting lost, ignored, or misapplied. All 38 cases that the Department analyzed for completeness purposes reflect a well-functioning and substantively accurate sanction referral and case-action process, and this record does not support the OSA’s conclusion to the contrary. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish and maintain effective internal control over Federal awards. 45 CFR 264.30 requires the Department to sanction individuals not cooperating with child support enforcement. The Department did not demonstrate effective internal control over the TANF program or provide documentation to support compliance with child support non-cooperation requirements. As stated in the Condition, OSA is required to evaluate the report (population) to ensure that the population provided is accurate and complete. During this evaluation, it became evident that the population was not accurate or complete. OFI is responsible for ensuring that individuals not cooperating with child support enforcement are properly sanctioned. Without a complete and accurate population of sanction referrals from DSER to TANF, OFI cannot attest that: • all DSER sanction referrals are tracked to ensure that referrals are not “lost, ignored, or misapplied,” or • management is properly overseeing compliance with 45 CFR 264.30. Therefore, OFI’s inability to provide an accurate and complete population of referrals validates that there is not a “well-functioning and substantively accurate sanction referral and case-action process” in place. The finding remains as stated. (State Number: 23-1111-02)
(2023-081) Title: Internal control over TANF performance reporting and work participation procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Reporting Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 261.60 through .62; 45 CFR 265.7 and .8 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain adequate documentation, perform adequate verification, and implement other control procedures for Temporary Assistance for Needy Families (TANF) client work participation. Work participation activities include unsubsidized employment, job search and job readiness, job skills training directly related to employment, vocational education, and other work-related programs. The Department must report the actual hours that a work-eligible TANF client participates in these work-related activities on the ACF-199 TANF Data Report on a quarterly basis. These reports are required by the Federal government. Condition: The Department reported incorrect work participation information on the ACF-199 reports. Of the 30 clients tested, inaccurate or unverifiable work participation data was reported for five clients, including inaccurate: • countable months towards the Federal time limit of 60 months, • work participation status, • unsubsidized employment hours, and • job search and readiness hours. The Office of the State Auditor selected a non-statistical random sample. Context: The Department must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of information reported to the Federal government and used to calculate work participation rates. In fiscal year 2023, the number of families reported on the ACF-199 report ranged from approximately 10,000 to 12,000 per quarter. Cause: • Lack of adequate procedures to ensure work participation data is accurately reported on the quarterly Federal performance reports • Lack of supervisory oversight Effect: • Incorrect work participation data reported to the Federal government may affect the Federal requirement for TANF’s State Maintenance of Effort. • The Federal government may penalize the State by an amount not less than one percent and not more than five percent of the grant award for violation of work verification plan requirements. Recommendation: We recommend that the Department enhance existing procedures to ensure that the information reported on the ACF-199 reports is accurate and complete prior to submission to the Federal government. This should include increased systemic monitoring to improve the reliability of work participation data that is reported to the Federal government. Corrective Action Plan: See F-34 Management’s Response: The Department agrees with this finding. OFI staff will meet internally to review system protocols and discuss possible changes to increase reporting accuracy. Subsequently, OFI will meet with Fedcap technical staff to discuss possible system information exchange improvements. If feasible improvements are identified that will lead to a marked increase in reporting accuracy, OFI will work internally and with Fedcap staff to implement changes. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1111-06)
(2023-083) Title: Internal control over CCDF provider payments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U. S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $3,101 Likely Questioned Costs: $32,099; likely questioned costs were projected by dividing the known questioned costs in our sample by total provider payments tested to establish an error rate, then applying that error rate to total provider payments in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program provides funds to increase the availability, affordability, and quality of childcare services in the State. The Department provides biweekly payments to childcare providers for services rendered. Provider payment amounts are based on current childcare market rates and the approved childcare subsidy awarded on behalf of the child receiving care. Once the subsidy is awarded, the Department accepts electronic invoices from the provider through a portal. Invoices are reviewed and approved by the Department prior to payment processing. The Office of the State Auditor (OSA) tested 60 provider payments to verify that the payments were accurate and in line with program guidelines and identified one provider’s biweekly invoice was overpaid by $151 due to an inaccurate childcare subsidy determination. This error was not identified by the Department during the review and approval process and persisted for 10 months of fiscal year 2023, resulting in a total overpayment of $3,101. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $40.1 million to 1,056 providers in the CCDF program. Cause: Lack of adequate supervisory oversight Effect: • Inaccurate childcare subsidy determinations will result in overpayments or underpayments to providers. • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. The Department will enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. The Program will seek to maintain a below 10% threshold of improper payments as required by CCDF Rule. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-02)
(2023-083) Title: Internal control over CCDF provider payments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U. S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $3,101 Likely Questioned Costs: $32,099; likely questioned costs were projected by dividing the known questioned costs in our sample by total provider payments tested to establish an error rate, then applying that error rate to total provider payments in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program provides funds to increase the availability, affordability, and quality of childcare services in the State. The Department provides biweekly payments to childcare providers for services rendered. Provider payment amounts are based on current childcare market rates and the approved childcare subsidy awarded on behalf of the child receiving care. Once the subsidy is awarded, the Department accepts electronic invoices from the provider through a portal. Invoices are reviewed and approved by the Department prior to payment processing. The Office of the State Auditor (OSA) tested 60 provider payments to verify that the payments were accurate and in line with program guidelines and identified one provider’s biweekly invoice was overpaid by $151 due to an inaccurate childcare subsidy determination. This error was not identified by the Department during the review and approval process and persisted for 10 months of fiscal year 2023, resulting in a total overpayment of $3,101. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $40.1 million to 1,056 providers in the CCDF program. Cause: Lack of adequate supervisory oversight Effect: • Inaccurate childcare subsidy determinations will result in overpayments or underpayments to providers. • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. The Department will enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. The Program will seek to maintain a below 10% threshold of improper payments as required by CCDF Rule. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-02)
(2023-084) Title: Internal control over CCDF provider application and payment approvals needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure integrity and accountability, while maintaining continuity of services, in the CCDF program. Condition: The CCDF program provides monthly stabilization grant payments to eligible childcare providers. The Department utilizes the InforME system as a mechanism for providers to submit applications for the American Rescue Plan Act’s Child Care Stabilization Funds (CCSF) under the CCDF program. The Department reviews the application to ensure that the provider is eligible for CCSF, provider costs submitted for CCSF reimbursement are allowable, required program certifications are complete, and payment amounts are accurate, and then approves the application in the InforME system and initiates grant payments. The Office of the State Auditor (OSA) tested 60 CCSF provider payments to verify that payments are allowable, accurate, and made to eligible providers, and identified the following: • Documentation in support of grant application approvals was not maintained for any of the 60 providers reviewed. • Nine provider CCSF grant applications were manually modified by the Department, and documentation of the modifications or the user initiating the modification was not maintained. The Department does not require documentation to support the modifications in the InforME system. In addition, providers are not notified of modifications to submitted applications. The nine modifications noted as exceptions resulted in changes to the amount paid to providers in the month selected for testing. For the provider applications and payments noted above, OSA verified that all providers were eligible for CCSF and payments were accurate. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $34.4 million in CCSF to over 1,300 providers. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential unauthorized application approvals • Potential unauthorized or inaccurate application modifications, which may lead to inaccurate provider payment amounts Recommendation: We recommend that the Department enhance policies and procedures to include a requirement for documentation of provider application modifications and approvals and increase supervisory oversight of these processes. This will help ensure that only authorized and accurate provider application modifications, approvals, and resulting payments are processed. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. Updates have been made to the Portal to identify program personnel making determinations to ensure appropriate supporting documentation. Updates have been made to the system to send email communications to the providers, an itemization of monthly payments and when changes have been made to determinations. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-01)
(2023-085) Title: Internal control over CCDF provider health and safety requirements needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.41 and .68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Lead Agencies are required to design, implement, and enforce health and safety requirements for the protection of children. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program is administered by the Office of Child and Family Services (OCFS) and provides funds to increase the availability, affordability, and quality of childcare services in the State. OCFS completes annual childcare provider site visits or licensing inspections for providers receiving subsidies from the CCDF program. During site visits and licensing inspections, OCFS reviews Federal program health and safety requirements using a provider compliance checklist. Any deficiencies are noted by OCFS, corrective action by the provider is required, and the frequency of site visits or licensing inspections is increased until remediation of noted deficiencies is complete. The Office of the State Auditor reviewed the listing of providers subject to health and safety site visits or licensing inspections and identified that 27 provider facilities did not receive a site visit or licensing inspection during fiscal year 2023 as required. OCFS does not have adequate policies and procedures in place to monitor providers due for annual health and safety site visits or licensing inspections. Context: The Department provided $87.4 million to CCDF program providers in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Providers not meeting CCDF program regulations for health and safety may go undetected, or deficiencies may not be remediated timely. Recommendation: We recommend that OCFS enhance policies and procedures to ensure that required annual provider site visits and licensing inspections, and any resulting corrective action, are monitored and completed. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. Child Care Licensing is responsible for completing at least an annual onsite inspection to ensure health and safety requirements are met. This was not met with 27 providers which is approximately 1% of licensed child care providers and license exempt providers receiving federal CCDF subsidy. During the period under review the Licensing team had multiple vacancies which is largely the reason not all providers were seen within the one year. Contact: Janet Whitten, CLIS Program Manager, DHHS, 207-441-2259 (State Number: 23-1114-03)
(2023-085) Title: Internal control over CCDF provider health and safety requirements needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.41 and .68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Lead Agencies are required to design, implement, and enforce health and safety requirements for the protection of children. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program is administered by the Office of Child and Family Services (OCFS) and provides funds to increase the availability, affordability, and quality of childcare services in the State. OCFS completes annual childcare provider site visits or licensing inspections for providers receiving subsidies from the CCDF program. During site visits and licensing inspections, OCFS reviews Federal program health and safety requirements using a provider compliance checklist. Any deficiencies are noted by OCFS, corrective action by the provider is required, and the frequency of site visits or licensing inspections is increased until remediation of noted deficiencies is complete. The Office of the State Auditor reviewed the listing of providers subject to health and safety site visits or licensing inspections and identified that 27 provider facilities did not receive a site visit or licensing inspection during fiscal year 2023 as required. OCFS does not have adequate policies and procedures in place to monitor providers due for annual health and safety site visits or licensing inspections. Context: The Department provided $87.4 million to CCDF program providers in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Providers not meeting CCDF program regulations for health and safety may go undetected, or deficiencies may not be remediated timely. Recommendation: We recommend that OCFS enhance policies and procedures to ensure that required annual provider site visits and licensing inspections, and any resulting corrective action, are monitored and completed. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. Child Care Licensing is responsible for completing at least an annual onsite inspection to ensure health and safety requirements are met. This was not met with 27 providers which is approximately 1% of licensed child care providers and license exempt providers receiving federal CCDF subsidy. During the period under review the Licensing team had multiple vacancies which is largely the reason not all providers were seen within the one year. Contact: Janet Whitten, CLIS Program Manager, DHHS, 207-441-2259 (State Number: 23-1114-03)
(2023-083) Title: Internal control over CCDF provider payments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U. S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $3,101 Likely Questioned Costs: $32,099; likely questioned costs were projected by dividing the known questioned costs in our sample by total provider payments tested to establish an error rate, then applying that error rate to total provider payments in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program provides funds to increase the availability, affordability, and quality of childcare services in the State. The Department provides biweekly payments to childcare providers for services rendered. Provider payment amounts are based on current childcare market rates and the approved childcare subsidy awarded on behalf of the child receiving care. Once the subsidy is awarded, the Department accepts electronic invoices from the provider through a portal. Invoices are reviewed and approved by the Department prior to payment processing. The Office of the State Auditor (OSA) tested 60 provider payments to verify that the payments were accurate and in line with program guidelines and identified one provider’s biweekly invoice was overpaid by $151 due to an inaccurate childcare subsidy determination. This error was not identified by the Department during the review and approval process and persisted for 10 months of fiscal year 2023, resulting in a total overpayment of $3,101. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $40.1 million to 1,056 providers in the CCDF program. Cause: Lack of adequate supervisory oversight Effect: • Inaccurate childcare subsidy determinations will result in overpayments or underpayments to providers. • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. The Department will enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. The Program will seek to maintain a below 10% threshold of improper payments as required by CCDF Rule. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-02)
(2023-085) Title: Internal control over CCDF provider health and safety requirements needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Special tests and provisions Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 45 CFR 98.41 and .68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Lead Agencies are required to design, implement, and enforce health and safety requirements for the protection of children. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program is administered by the Office of Child and Family Services (OCFS) and provides funds to increase the availability, affordability, and quality of childcare services in the State. OCFS completes annual childcare provider site visits or licensing inspections for providers receiving subsidies from the CCDF program. During site visits and licensing inspections, OCFS reviews Federal program health and safety requirements using a provider compliance checklist. Any deficiencies are noted by OCFS, corrective action by the provider is required, and the frequency of site visits or licensing inspections is increased until remediation of noted deficiencies is complete. The Office of the State Auditor reviewed the listing of providers subject to health and safety site visits or licensing inspections and identified that 27 provider facilities did not receive a site visit or licensing inspection during fiscal year 2023 as required. OCFS does not have adequate policies and procedures in place to monitor providers due for annual health and safety site visits or licensing inspections. Context: The Department provided $87.4 million to CCDF program providers in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Providers not meeting CCDF program regulations for health and safety may go undetected, or deficiencies may not be remediated timely. Recommendation: We recommend that OCFS enhance policies and procedures to ensure that required annual provider site visits and licensing inspections, and any resulting corrective action, are monitored and completed. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. Child Care Licensing is responsible for completing at least an annual onsite inspection to ensure health and safety requirements are met. This was not met with 27 providers which is approximately 1% of licensed child care providers and license exempt providers receiving federal CCDF subsidy. During the period under review the Licensing team had multiple vacancies which is largely the reason not all providers were seen within the one year. Contact: Janet Whitten, CLIS Program Manager, DHHS, 207-441-2259 (State Number: 23-1114-03)