Finding Reference Number: 2023-023 NH Department of Safety Disaster Grants – Public Assistance (Presidentially Declared Disasters) and COVID-19 Public Assistance (Presidentially Declared Disasters) (Assistance Listing #97.036) Federal Award Numbers: FEMA-4622-DR-NH, FEMA-4624-DR-NH, FEMA-4457-DR-NH, FEMA-4370-DR, FEMA-4693-DR, FEMA-4355-DR, FEMA-4329-DR, FEMA-4516-DR-NH Federal Award Year: July 17-19, 2021, July 29-30, 2021, July 11-12, 2019, March 2-8, 2018, December 22-December 25, 2022, October 29-November 1, 2017, July 1-2, 2017, January 20, 2020 U.S. Department of Homeland Security Compliance Requirement: Subrecipient Monitoring Type of Finding: Material Weakness and Material Noncompliance Prior Year Finding: None Statistically Valid Sample: No Criteria A pass-through entity (PTE) must: 1. Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: (1) the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(a)(1); (2) all requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.332(a)(2)); and (3) any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.332(a)(3)). 2. Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). 3. Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: a. Reviewing financial and programmatic (performance and special reports) required by the PTE. b. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. c. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Additionally, 45 CFR section 75 303(a) states the non Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition As part of the Disaster Grants - Public Assistance program (DGPA), the New Hampshire Department of Safety - Homeland Security and Emergency Management (the Department) enters into grant agreements with local municipalities to provide reimbursement for expenditures incurred as a result of New Hampshire declared disasters. During the year ended June 30, 2023, $27,041,873 was passed through to 85 subrecipients. As part of our testwork over the subrecipient monitoring process, we noted the following: A. The Department communicates award information to subrecipients through the approved agreement. Per review of the agreement, for each of the 27 subrecipients selected for testwork, the Department did not communicate all the required award information as outlined in 2 CFR section 200.332(a). Specifically, the following elements were not communicated: - Subrecipient unique entity identifier (not communicated for 19/27); - Federal Award Identification Number (FAIN) (not communicated for 27/27); - Identification of whether the award is R&D (not communicated for 27/27); and - Indirect cost rate for the federal award (including if the de minimis rate is charged) (not communicated for 27/27) B. The Department evaluated the subrecipient risk of noncompliance through a risk assessment for each of the 13 subrecipients selected for testwork. However, there was no formal risk assessment policy in place that indicated how frequently risk assessments should be performed. As a result, 5 subrecipients did not have risk assessments performed during the current year for purposes of determining the appropriate subrecipient monitoring response. These prior fiscal year(s) risk assessments were performed as of the following dates: September 2019, October and December 2021, May and June 2022. C. For each of the 13 subrecipients selected for testwork, the Department did not perform any during the award monitoring. D. During our testwork over the Department’s review of subrecipient uniform guidance reports, we noted there were no UG report review policies and procedures in place. For the 13 subrecipients selected for testwork, 6 subrecipients were identified in which the Department did not review the most recent uniform guidance report issued. Specifically, we noted: • For 5 of 13 subrecipients, the subrecipient’s uniform guidance was not reviewed due to updated risk assessments not being performed in the current year (refer to item 2 above) • For 1 of 13 subrecipients, the current year risk assessment was performed prior to the receipt of the subrecipient’s uniform guidance report and management did not go back to review the report Cause The cause of the condition found was primarily due to the Department not performing their sub monitoring internal controls in accordance with written formal policies and procedures. Questioned Costs None. Recommendation We recommend that the Department develop policies and procedures and implement internal controls to ensure that the Department complies with 2 CFR section 200.332(a-h) and 2 CFR section 200.501(h). View of Responsible Officials: Management concurs with the finding above.
Finding Reference Number: 2023-023 NH Department of Safety Disaster Grants – Public Assistance (Presidentially Declared Disasters) and COVID-19 Public Assistance (Presidentially Declared Disasters) (Assistance Listing #97.036) Federal Award Numbers: FEMA-4622-DR-NH, FEMA-4624-DR-NH, FEMA-4457-DR-NH, FEMA-4370-DR, FEMA-4693-DR, FEMA-4355-DR, FEMA-4329-DR, FEMA-4516-DR-NH Federal Award Year: July 17-19, 2021, July 29-30, 2021, July 11-12, 2019, March 2-8, 2018, December 22-December 25, 2022, October 29-November 1, 2017, July 1-2, 2017, January 20, 2020 U.S. Department of Homeland Security Compliance Requirement: Subrecipient Monitoring Type of Finding: Material Weakness and Material Noncompliance Prior Year Finding: None Statistically Valid Sample: No Criteria A pass-through entity (PTE) must: 1. Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: (1) the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(a)(1); (2) all requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.332(a)(2)); and (3) any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.332(a)(3)). 2. Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). 3. Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: a. Reviewing financial and programmatic (performance and special reports) required by the PTE. b. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. c. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Additionally, 45 CFR section 75 303(a) states the non Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition As part of the Disaster Grants - Public Assistance program (DGPA), the New Hampshire Department of Safety - Homeland Security and Emergency Management (the Department) enters into grant agreements with local municipalities to provide reimbursement for expenditures incurred as a result of New Hampshire declared disasters. During the year ended June 30, 2023, $27,041,873 was passed through to 85 subrecipients. As part of our testwork over the subrecipient monitoring process, we noted the following: A. The Department communicates award information to subrecipients through the approved agreement. Per review of the agreement, for each of the 27 subrecipients selected for testwork, the Department did not communicate all the required award information as outlined in 2 CFR section 200.332(a). Specifically, the following elements were not communicated: - Subrecipient unique entity identifier (not communicated for 19/27); - Federal Award Identification Number (FAIN) (not communicated for 27/27); - Identification of whether the award is R&D (not communicated for 27/27); and - Indirect cost rate for the federal award (including if the de minimis rate is charged) (not communicated for 27/27) B. The Department evaluated the subrecipient risk of noncompliance through a risk assessment for each of the 13 subrecipients selected for testwork. However, there was no formal risk assessment policy in place that indicated how frequently risk assessments should be performed. As a result, 5 subrecipients did not have risk assessments performed during the current year for purposes of determining the appropriate subrecipient monitoring response. These prior fiscal year(s) risk assessments were performed as of the following dates: September 2019, October and December 2021, May and June 2022. C. For each of the 13 subrecipients selected for testwork, the Department did not perform any during the award monitoring. D. During our testwork over the Department’s review of subrecipient uniform guidance reports, we noted there were no UG report review policies and procedures in place. For the 13 subrecipients selected for testwork, 6 subrecipients were identified in which the Department did not review the most recent uniform guidance report issued. Specifically, we noted: • For 5 of 13 subrecipients, the subrecipient’s uniform guidance was not reviewed due to updated risk assessments not being performed in the current year (refer to item 2 above) • For 1 of 13 subrecipients, the current year risk assessment was performed prior to the receipt of the subrecipient’s uniform guidance report and management did not go back to review the report Cause The cause of the condition found was primarily due to the Department not performing their sub monitoring internal controls in accordance with written formal policies and procedures. Questioned Costs None. Recommendation We recommend that the Department develop policies and procedures and implement internal controls to ensure that the Department complies with 2 CFR section 200.332(a-h) and 2 CFR section 200.501(h). View of Responsible Officials: Management concurs with the finding above.
Item: 2023-002 Assistance Listing Number: 21.027 Programs: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Federal Agency: U.S. Department of Treasury Pass-Through Agencies: State of Arizona, Office of the Governor Pass-Through Grantor Identifying Number: EL9HZNBAN1B9 Award Year: July 1, 2022 – June 30, 2023 Compliance Requirement: Subrecipient Monitoring Criteria: In accordance with 2 CFR sections 200.330, .331, and .501(h), pass-through entities must (a) identify the award and applicable requirements, (b) evaluate the subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CR section 200.332(b), (c) monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR section 200.332(d) through (f), and (d) ensure accountability for any for-profit subrecipients. Condition: In connection with our testing of Arizona Foundation for Human Service Providers (the Foundation) subrecipient monitoring, we noted that the Foundation did not timely or effectively monitor the activities of subrecipients post-payment to ensure that the subawards were used for authorized purposes and complied with the terms and conditions of the subaward. Questioned Costs: N/A Context: In a population of 58 subrecipients, we conducted a nonstatistical sample of 9 subrecipients to assess the Foundation’s compliance with subrecipient monitoring. In all instances, we noted the Foundation did not obtain and review monitoring reports in a timely fashion. For 2 of 9 subrecipients, we noted monitoring activities were not effective as it was determined that the subrecipients expended funds under the subaward on activities that were not part of their original approved action plan. However, we noted the activities reported were still allowable under the subaward but were not in accordance with the sub awardees originally communicated funding use plan. Effect: Subrecipients were not timely or effectively monitored post-payment to ensure that the subawards were used for authorized purposes and complied with the terms and conditions of the subaward. This is deemed to be a material weakness in internal control on compliance. Cause: The Foundation did not have sufficient controls in place to timely or effectively monitor subrecipients. Additionally, the Foundation did not have sufficient procedures for the ongoing post-payment review of subawards. Identification as a Repeat Finding: Not a repeat finding Recommendation: We recommend that the Foundation enhance their existing policies and procedures to ensure sufficient controls are in place to properly monitor subrecipients. This should include specific enhancements to the ongoing post-payment review of subawards and well as supervision and review controls to ensure the procedures are performed in a timely and thorough manner. Views of Responsible Officials: Management of the Foundation concurs in part with the finding. See Corrective Action Plan.
Finding 2023-059: U.S. Department of Health and Human Services ALN #93.575 and 93.596, Child Care Development Fund Cluster (CCDF) (COVID-19) Grant #2101MTCCDF, 2201MTCCDD, 2201MTCCDF, 2301MTCCDD, 2301MTCCDF, 2101MTCC5 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to be communicated to subrecipients to identify the federal award properly. Federal regulation, 2 CFR 200.332(b), requires non-federal entities to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate level of subrecipient monitoring. Federal regulation, 2 CFR 200.332(d), requires non-federal entities to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.334, requires financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award be retained for three years. Federal regulation, 45 CFR 98.68(a), requires lead agencies, such as the Department of Public Health and Human Services (department), to describe in their state plan the effective internal controls in place to ensure program integrity and accountability. The department’s State Plan outlines the department’s processes for regularly evaluating internal control activities, including reviews of the Child Care Resource and Referral (CCR&R) agency audits to evaluate performance. The State Plan also indicates that prior to each contract year with the CCR&R agencies, the contract manager and fiscal analyst conduct a risk assessment on each agency, and that the risk assessment draws on the agency’s Single Audit (amongst other factors). Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted the following instances where controls were ineffective in complying with federal regulations governing subrecipient monitoring, related to the CCR&R agencies. (1) The department’s internal controls were ineffective in ensuring that all of the federal award identification items required by 2 CFR 200.332(a)(1) were included in its subaward agreements with the CCR&R agencies in fiscal years 2022 and 23. The 2022 agreements do not include federal award identification number, award date, period of performance start and end date, budget period start and end date, identification of whether the award is research and development related, and the required information on indirect costs. The 2023 agreements contain all required elements other than the budget period start and end date. While the 2023 agreements include most of the required federal award identification information, the disclosed information is for the department’s most recent federal awards received. As part of our audit, we noted the department’s processes include moving expenditures between grant awards, to maximize grant funds as grants are nearing close-out. If similar practices to those we observed in the current audit period continue, it is possible the federal awards disclosed in the 2023 agreements will not be those to which the department ultimately attributes all the subaward expenditures. (2) The department's internal controls were ineffective in ensuring compliance with State Plan procedures related to program integrity and accountability. The department could not provide evidence risk assessments were completed because associated documentation was not retained for the CCR&R agencies for federal fiscal year 2022. Additionally, the department uses the risk assessments to document its review and consideration of audit reports, including Single Audit reports, so they could not demonstrate reviews occurred as part of the risk assessment process. Federal regulations require these risk assessments and audit report reviews. Questioned Costs: No questioned costs identified. Context: There are six CCR&R agencies, covering seven regions throughout the state. For risk assessment purposes, there are only six entities over which risk should be assessed. The department enters into separate agreements by region for contracting purposes, so there are seven contracts. As discussed in the condition above, we found issues in both years of the audit period. In total, the department paid the CCR&R agencies approximately $29.2 million during fiscal years 2022 and 2023, or 18 percent of the total program expenditures for the audit period. Effect: The department is not in compliance with federal subrecipient monitoring requirements and did not follow the procedures in the State Plan. The CCR&R agencies were not provided all the information required to identify their subawards. In addition, the CCR&R agencies may not have all of the information necessary to comply with the terms of the award and to meet all federal compliance requirements, which may limit the ability of subrecipients to comply. Subrecipients subject to Single Audits will also need this information for their audit. Additionally, the risk assessment process is an important element of internal controls over the compliance requirements carried out by the CCR&Rs. There is risk that the department may not appropriately monitor the activities of the subrecipients. Cause: The department’ standard contract template did not contain all required elements. In addressing prior audit findings 2021-051, 2021-052, and 2021-053 related to contract disclosures in other federal programs, the department centrally worked on an update to the contract templates. However, per department personnel, this update occurred too late for changes to be implemented for the 2022 contracts. Regarding the budget period information’s exclusion from the 2023 contracts, department personnel indicated the intent in the contract template is for the contract term to be the budget period, as communicated through the budget attachment. For these specific contracts, however, the budget attachment does not include the budget period. Regarding the risk assessments, program personnel indicated they believe the 2022 risk assessment were completed but saved over when the 2023 risk assessments were started. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls over subrecipient monitoring for the Child Care Development Fund Cluster to ensure all award identification information is communicated to subrecipients, subrecipient risk assessments and associated audit report reviews are completed, and documentation is retained. B. Comply with federal subrecipient monitoring regulations and State Plan requirements by communicating all award identification information to subrecipients and by completing and retaining documentation of risk assessments and audit report reviews for subrecipients. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-059: U.S. Department of Health and Human Services ALN #93.575 and 93.596, Child Care Development Fund Cluster (CCDF) (COVID-19) Grant #2101MTCCDF, 2201MTCCDD, 2201MTCCDF, 2301MTCCDD, 2301MTCCDF, 2101MTCC5 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to be communicated to subrecipients to identify the federal award properly. Federal regulation, 2 CFR 200.332(b), requires non-federal entities to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate level of subrecipient monitoring. Federal regulation, 2 CFR 200.332(d), requires non-federal entities to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.334, requires financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award be retained for three years. Federal regulation, 45 CFR 98.68(a), requires lead agencies, such as the Department of Public Health and Human Services (department), to describe in their state plan the effective internal controls in place to ensure program integrity and accountability. The department’s State Plan outlines the department’s processes for regularly evaluating internal control activities, including reviews of the Child Care Resource and Referral (CCR&R) agency audits to evaluate performance. The State Plan also indicates that prior to each contract year with the CCR&R agencies, the contract manager and fiscal analyst conduct a risk assessment on each agency, and that the risk assessment draws on the agency’s Single Audit (amongst other factors). Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted the following instances where controls were ineffective in complying with federal regulations governing subrecipient monitoring, related to the CCR&R agencies. (1) The department’s internal controls were ineffective in ensuring that all of the federal award identification items required by 2 CFR 200.332(a)(1) were included in its subaward agreements with the CCR&R agencies in fiscal years 2022 and 23. The 2022 agreements do not include federal award identification number, award date, period of performance start and end date, budget period start and end date, identification of whether the award is research and development related, and the required information on indirect costs. The 2023 agreements contain all required elements other than the budget period start and end date. While the 2023 agreements include most of the required federal award identification information, the disclosed information is for the department’s most recent federal awards received. As part of our audit, we noted the department’s processes include moving expenditures between grant awards, to maximize grant funds as grants are nearing close-out. If similar practices to those we observed in the current audit period continue, it is possible the federal awards disclosed in the 2023 agreements will not be those to which the department ultimately attributes all the subaward expenditures. (2) The department's internal controls were ineffective in ensuring compliance with State Plan procedures related to program integrity and accountability. The department could not provide evidence risk assessments were completed because associated documentation was not retained for the CCR&R agencies for federal fiscal year 2022. Additionally, the department uses the risk assessments to document its review and consideration of audit reports, including Single Audit reports, so they could not demonstrate reviews occurred as part of the risk assessment process. Federal regulations require these risk assessments and audit report reviews. Questioned Costs: No questioned costs identified. Context: There are six CCR&R agencies, covering seven regions throughout the state. For risk assessment purposes, there are only six entities over which risk should be assessed. The department enters into separate agreements by region for contracting purposes, so there are seven contracts. As discussed in the condition above, we found issues in both years of the audit period. In total, the department paid the CCR&R agencies approximately $29.2 million during fiscal years 2022 and 2023, or 18 percent of the total program expenditures for the audit period. Effect: The department is not in compliance with federal subrecipient monitoring requirements and did not follow the procedures in the State Plan. The CCR&R agencies were not provided all the information required to identify their subawards. In addition, the CCR&R agencies may not have all of the information necessary to comply with the terms of the award and to meet all federal compliance requirements, which may limit the ability of subrecipients to comply. Subrecipients subject to Single Audits will also need this information for their audit. Additionally, the risk assessment process is an important element of internal controls over the compliance requirements carried out by the CCR&Rs. There is risk that the department may not appropriately monitor the activities of the subrecipients. Cause: The department’ standard contract template did not contain all required elements. In addressing prior audit findings 2021-051, 2021-052, and 2021-053 related to contract disclosures in other federal programs, the department centrally worked on an update to the contract templates. However, per department personnel, this update occurred too late for changes to be implemented for the 2022 contracts. Regarding the budget period information’s exclusion from the 2023 contracts, department personnel indicated the intent in the contract template is for the contract term to be the budget period, as communicated through the budget attachment. For these specific contracts, however, the budget attachment does not include the budget period. Regarding the risk assessments, program personnel indicated they believe the 2022 risk assessment were completed but saved over when the 2023 risk assessments were started. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls over subrecipient monitoring for the Child Care Development Fund Cluster to ensure all award identification information is communicated to subrecipients, subrecipient risk assessments and associated audit report reviews are completed, and documentation is retained. B. Comply with federal subrecipient monitoring regulations and State Plan requirements by communicating all award identification information to subrecipients and by completing and retaining documentation of risk assessments and audit report reviews for subrecipients. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-059: U.S. Department of Health and Human Services ALN #93.575 and 93.596, Child Care Development Fund Cluster (CCDF) (COVID-19) Grant #2101MTCCDF, 2201MTCCDD, 2201MTCCDF, 2301MTCCDD, 2301MTCCDF, 2101MTCC5 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to be communicated to subrecipients to identify the federal award properly. Federal regulation, 2 CFR 200.332(b), requires non-federal entities to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate level of subrecipient monitoring. Federal regulation, 2 CFR 200.332(d), requires non-federal entities to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.334, requires financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award be retained for three years. Federal regulation, 45 CFR 98.68(a), requires lead agencies, such as the Department of Public Health and Human Services (department), to describe in their state plan the effective internal controls in place to ensure program integrity and accountability. The department’s State Plan outlines the department’s processes for regularly evaluating internal control activities, including reviews of the Child Care Resource and Referral (CCR&R) agency audits to evaluate performance. The State Plan also indicates that prior to each contract year with the CCR&R agencies, the contract manager and fiscal analyst conduct a risk assessment on each agency, and that the risk assessment draws on the agency’s Single Audit (amongst other factors). Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted the following instances where controls were ineffective in complying with federal regulations governing subrecipient monitoring, related to the CCR&R agencies. (1) The department’s internal controls were ineffective in ensuring that all of the federal award identification items required by 2 CFR 200.332(a)(1) were included in its subaward agreements with the CCR&R agencies in fiscal years 2022 and 23. The 2022 agreements do not include federal award identification number, award date, period of performance start and end date, budget period start and end date, identification of whether the award is research and development related, and the required information on indirect costs. The 2023 agreements contain all required elements other than the budget period start and end date. While the 2023 agreements include most of the required federal award identification information, the disclosed information is for the department’s most recent federal awards received. As part of our audit, we noted the department’s processes include moving expenditures between grant awards, to maximize grant funds as grants are nearing close-out. If similar practices to those we observed in the current audit period continue, it is possible the federal awards disclosed in the 2023 agreements will not be those to which the department ultimately attributes all the subaward expenditures. (2) The department's internal controls were ineffective in ensuring compliance with State Plan procedures related to program integrity and accountability. The department could not provide evidence risk assessments were completed because associated documentation was not retained for the CCR&R agencies for federal fiscal year 2022. Additionally, the department uses the risk assessments to document its review and consideration of audit reports, including Single Audit reports, so they could not demonstrate reviews occurred as part of the risk assessment process. Federal regulations require these risk assessments and audit report reviews. Questioned Costs: No questioned costs identified. Context: There are six CCR&R agencies, covering seven regions throughout the state. For risk assessment purposes, there are only six entities over which risk should be assessed. The department enters into separate agreements by region for contracting purposes, so there are seven contracts. As discussed in the condition above, we found issues in both years of the audit period. In total, the department paid the CCR&R agencies approximately $29.2 million during fiscal years 2022 and 2023, or 18 percent of the total program expenditures for the audit period. Effect: The department is not in compliance with federal subrecipient monitoring requirements and did not follow the procedures in the State Plan. The CCR&R agencies were not provided all the information required to identify their subawards. In addition, the CCR&R agencies may not have all of the information necessary to comply with the terms of the award and to meet all federal compliance requirements, which may limit the ability of subrecipients to comply. Subrecipients subject to Single Audits will also need this information for their audit. Additionally, the risk assessment process is an important element of internal controls over the compliance requirements carried out by the CCR&Rs. There is risk that the department may not appropriately monitor the activities of the subrecipients. Cause: The department’ standard contract template did not contain all required elements. In addressing prior audit findings 2021-051, 2021-052, and 2021-053 related to contract disclosures in other federal programs, the department centrally worked on an update to the contract templates. However, per department personnel, this update occurred too late for changes to be implemented for the 2022 contracts. Regarding the budget period information’s exclusion from the 2023 contracts, department personnel indicated the intent in the contract template is for the contract term to be the budget period, as communicated through the budget attachment. For these specific contracts, however, the budget attachment does not include the budget period. Regarding the risk assessments, program personnel indicated they believe the 2022 risk assessment were completed but saved over when the 2023 risk assessments were started. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls over subrecipient monitoring for the Child Care Development Fund Cluster to ensure all award identification information is communicated to subrecipients, subrecipient risk assessments and associated audit report reviews are completed, and documentation is retained. B. Comply with federal subrecipient monitoring regulations and State Plan requirements by communicating all award identification information to subrecipients and by completing and retaining documentation of risk assessments and audit report reviews for subrecipients. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-059: U.S. Department of Health and Human Services ALN #93.575 and 93.596, Child Care Development Fund Cluster (CCDF) (COVID-19) Grant #2101MTCCDF, 2201MTCCDD, 2201MTCCDF, 2301MTCCDD, 2301MTCCDF, 2101MTCC5 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to be communicated to subrecipients to identify the federal award properly. Federal regulation, 2 CFR 200.332(b), requires non-federal entities to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate level of subrecipient monitoring. Federal regulation, 2 CFR 200.332(d), requires non-federal entities to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.334, requires financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award be retained for three years. Federal regulation, 45 CFR 98.68(a), requires lead agencies, such as the Department of Public Health and Human Services (department), to describe in their state plan the effective internal controls in place to ensure program integrity and accountability. The department’s State Plan outlines the department’s processes for regularly evaluating internal control activities, including reviews of the Child Care Resource and Referral (CCR&R) agency audits to evaluate performance. The State Plan also indicates that prior to each contract year with the CCR&R agencies, the contract manager and fiscal analyst conduct a risk assessment on each agency, and that the risk assessment draws on the agency’s Single Audit (amongst other factors). Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted the following instances where controls were ineffective in complying with federal regulations governing subrecipient monitoring, related to the CCR&R agencies. (1) The department’s internal controls were ineffective in ensuring that all of the federal award identification items required by 2 CFR 200.332(a)(1) were included in its subaward agreements with the CCR&R agencies in fiscal years 2022 and 23. The 2022 agreements do not include federal award identification number, award date, period of performance start and end date, budget period start and end date, identification of whether the award is research and development related, and the required information on indirect costs. The 2023 agreements contain all required elements other than the budget period start and end date. While the 2023 agreements include most of the required federal award identification information, the disclosed information is for the department’s most recent federal awards received. As part of our audit, we noted the department’s processes include moving expenditures between grant awards, to maximize grant funds as grants are nearing close-out. If similar practices to those we observed in the current audit period continue, it is possible the federal awards disclosed in the 2023 agreements will not be those to which the department ultimately attributes all the subaward expenditures. (2) The department's internal controls were ineffective in ensuring compliance with State Plan procedures related to program integrity and accountability. The department could not provide evidence risk assessments were completed because associated documentation was not retained for the CCR&R agencies for federal fiscal year 2022. Additionally, the department uses the risk assessments to document its review and consideration of audit reports, including Single Audit reports, so they could not demonstrate reviews occurred as part of the risk assessment process. Federal regulations require these risk assessments and audit report reviews. Questioned Costs: No questioned costs identified. Context: There are six CCR&R agencies, covering seven regions throughout the state. For risk assessment purposes, there are only six entities over which risk should be assessed. The department enters into separate agreements by region for contracting purposes, so there are seven contracts. As discussed in the condition above, we found issues in both years of the audit period. In total, the department paid the CCR&R agencies approximately $29.2 million during fiscal years 2022 and 2023, or 18 percent of the total program expenditures for the audit period. Effect: The department is not in compliance with federal subrecipient monitoring requirements and did not follow the procedures in the State Plan. The CCR&R agencies were not provided all the information required to identify their subawards. In addition, the CCR&R agencies may not have all of the information necessary to comply with the terms of the award and to meet all federal compliance requirements, which may limit the ability of subrecipients to comply. Subrecipients subject to Single Audits will also need this information for their audit. Additionally, the risk assessment process is an important element of internal controls over the compliance requirements carried out by the CCR&Rs. There is risk that the department may not appropriately monitor the activities of the subrecipients. Cause: The department’ standard contract template did not contain all required elements. In addressing prior audit findings 2021-051, 2021-052, and 2021-053 related to contract disclosures in other federal programs, the department centrally worked on an update to the contract templates. However, per department personnel, this update occurred too late for changes to be implemented for the 2022 contracts. Regarding the budget period information’s exclusion from the 2023 contracts, department personnel indicated the intent in the contract template is for the contract term to be the budget period, as communicated through the budget attachment. For these specific contracts, however, the budget attachment does not include the budget period. Regarding the risk assessments, program personnel indicated they believe the 2022 risk assessment were completed but saved over when the 2023 risk assessments were started. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls over subrecipient monitoring for the Child Care Development Fund Cluster to ensure all award identification information is communicated to subrecipients, subrecipient risk assessments and associated audit report reviews are completed, and documentation is retained. B. Comply with federal subrecipient monitoring regulations and State Plan requirements by communicating all award identification information to subrecipients and by completing and retaining documentation of risk assessments and audit report reviews for subrecipients. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-059: U.S. Department of Health and Human Services ALN #93.575 and 93.596, Child Care Development Fund Cluster (CCDF) (COVID-19) Grant #2101MTCCDF, 2201MTCCDD, 2201MTCCDF, 2301MTCCDD, 2301MTCCDF, 2101MTCC5 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to be communicated to subrecipients to identify the federal award properly. Federal regulation, 2 CFR 200.332(b), requires non-federal entities to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate level of subrecipient monitoring. Federal regulation, 2 CFR 200.332(d), requires non-federal entities to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.334, requires financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award be retained for three years. Federal regulation, 45 CFR 98.68(a), requires lead agencies, such as the Department of Public Health and Human Services (department), to describe in their state plan the effective internal controls in place to ensure program integrity and accountability. The department’s State Plan outlines the department’s processes for regularly evaluating internal control activities, including reviews of the Child Care Resource and Referral (CCR&R) agency audits to evaluate performance. The State Plan also indicates that prior to each contract year with the CCR&R agencies, the contract manager and fiscal analyst conduct a risk assessment on each agency, and that the risk assessment draws on the agency’s Single Audit (amongst other factors). Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted the following instances where controls were ineffective in complying with federal regulations governing subrecipient monitoring, related to the CCR&R agencies. (1) The department’s internal controls were ineffective in ensuring that all of the federal award identification items required by 2 CFR 200.332(a)(1) were included in its subaward agreements with the CCR&R agencies in fiscal years 2022 and 23. The 2022 agreements do not include federal award identification number, award date, period of performance start and end date, budget period start and end date, identification of whether the award is research and development related, and the required information on indirect costs. The 2023 agreements contain all required elements other than the budget period start and end date. While the 2023 agreements include most of the required federal award identification information, the disclosed information is for the department’s most recent federal awards received. As part of our audit, we noted the department’s processes include moving expenditures between grant awards, to maximize grant funds as grants are nearing close-out. If similar practices to those we observed in the current audit period continue, it is possible the federal awards disclosed in the 2023 agreements will not be those to which the department ultimately attributes all the subaward expenditures. (2) The department's internal controls were ineffective in ensuring compliance with State Plan procedures related to program integrity and accountability. The department could not provide evidence risk assessments were completed because associated documentation was not retained for the CCR&R agencies for federal fiscal year 2022. Additionally, the department uses the risk assessments to document its review and consideration of audit reports, including Single Audit reports, so they could not demonstrate reviews occurred as part of the risk assessment process. Federal regulations require these risk assessments and audit report reviews. Questioned Costs: No questioned costs identified. Context: There are six CCR&R agencies, covering seven regions throughout the state. For risk assessment purposes, there are only six entities over which risk should be assessed. The department enters into separate agreements by region for contracting purposes, so there are seven contracts. As discussed in the condition above, we found issues in both years of the audit period. In total, the department paid the CCR&R agencies approximately $29.2 million during fiscal years 2022 and 2023, or 18 percent of the total program expenditures for the audit period. Effect: The department is not in compliance with federal subrecipient monitoring requirements and did not follow the procedures in the State Plan. The CCR&R agencies were not provided all the information required to identify their subawards. In addition, the CCR&R agencies may not have all of the information necessary to comply with the terms of the award and to meet all federal compliance requirements, which may limit the ability of subrecipients to comply. Subrecipients subject to Single Audits will also need this information for their audit. Additionally, the risk assessment process is an important element of internal controls over the compliance requirements carried out by the CCR&Rs. There is risk that the department may not appropriately monitor the activities of the subrecipients. Cause: The department’ standard contract template did not contain all required elements. In addressing prior audit findings 2021-051, 2021-052, and 2021-053 related to contract disclosures in other federal programs, the department centrally worked on an update to the contract templates. However, per department personnel, this update occurred too late for changes to be implemented for the 2022 contracts. Regarding the budget period information’s exclusion from the 2023 contracts, department personnel indicated the intent in the contract template is for the contract term to be the budget period, as communicated through the budget attachment. For these specific contracts, however, the budget attachment does not include the budget period. Regarding the risk assessments, program personnel indicated they believe the 2022 risk assessment were completed but saved over when the 2023 risk assessments were started. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls over subrecipient monitoring for the Child Care Development Fund Cluster to ensure all award identification information is communicated to subrecipients, subrecipient risk assessments and associated audit report reviews are completed, and documentation is retained. B. Comply with federal subrecipient monitoring regulations and State Plan requirements by communicating all award identification information to subrecipients and by completing and retaining documentation of risk assessments and audit report reviews for subrecipients. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-059: U.S. Department of Health and Human Services ALN #93.575 and 93.596, Child Care Development Fund Cluster (CCDF) (COVID-19) Grant #2101MTCCDF, 2201MTCCDD, 2201MTCCDF, 2301MTCCDD, 2301MTCCDF, 2101MTCC5 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to be communicated to subrecipients to identify the federal award properly. Federal regulation, 2 CFR 200.332(b), requires non-federal entities to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate level of subrecipient monitoring. Federal regulation, 2 CFR 200.332(d), requires non-federal entities to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.334, requires financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award be retained for three years. Federal regulation, 45 CFR 98.68(a), requires lead agencies, such as the Department of Public Health and Human Services (department), to describe in their state plan the effective internal controls in place to ensure program integrity and accountability. The department’s State Plan outlines the department’s processes for regularly evaluating internal control activities, including reviews of the Child Care Resource and Referral (CCR&R) agency audits to evaluate performance. The State Plan also indicates that prior to each contract year with the CCR&R agencies, the contract manager and fiscal analyst conduct a risk assessment on each agency, and that the risk assessment draws on the agency’s Single Audit (amongst other factors). Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted the following instances where controls were ineffective in complying with federal regulations governing subrecipient monitoring, related to the CCR&R agencies. (1) The department’s internal controls were ineffective in ensuring that all of the federal award identification items required by 2 CFR 200.332(a)(1) were included in its subaward agreements with the CCR&R agencies in fiscal years 2022 and 23. The 2022 agreements do not include federal award identification number, award date, period of performance start and end date, budget period start and end date, identification of whether the award is research and development related, and the required information on indirect costs. The 2023 agreements contain all required elements other than the budget period start and end date. While the 2023 agreements include most of the required federal award identification information, the disclosed information is for the department’s most recent federal awards received. As part of our audit, we noted the department’s processes include moving expenditures between grant awards, to maximize grant funds as grants are nearing close-out. If similar practices to those we observed in the current audit period continue, it is possible the federal awards disclosed in the 2023 agreements will not be those to which the department ultimately attributes all the subaward expenditures. (2) The department's internal controls were ineffective in ensuring compliance with State Plan procedures related to program integrity and accountability. The department could not provide evidence risk assessments were completed because associated documentation was not retained for the CCR&R agencies for federal fiscal year 2022. Additionally, the department uses the risk assessments to document its review and consideration of audit reports, including Single Audit reports, so they could not demonstrate reviews occurred as part of the risk assessment process. Federal regulations require these risk assessments and audit report reviews. Questioned Costs: No questioned costs identified. Context: There are six CCR&R agencies, covering seven regions throughout the state. For risk assessment purposes, there are only six entities over which risk should be assessed. The department enters into separate agreements by region for contracting purposes, so there are seven contracts. As discussed in the condition above, we found issues in both years of the audit period. In total, the department paid the CCR&R agencies approximately $29.2 million during fiscal years 2022 and 2023, or 18 percent of the total program expenditures for the audit period. Effect: The department is not in compliance with federal subrecipient monitoring requirements and did not follow the procedures in the State Plan. The CCR&R agencies were not provided all the information required to identify their subawards. In addition, the CCR&R agencies may not have all of the information necessary to comply with the terms of the award and to meet all federal compliance requirements, which may limit the ability of subrecipients to comply. Subrecipients subject to Single Audits will also need this information for their audit. Additionally, the risk assessment process is an important element of internal controls over the compliance requirements carried out by the CCR&Rs. There is risk that the department may not appropriately monitor the activities of the subrecipients. Cause: The department’ standard contract template did not contain all required elements. In addressing prior audit findings 2021-051, 2021-052, and 2021-053 related to contract disclosures in other federal programs, the department centrally worked on an update to the contract templates. However, per department personnel, this update occurred too late for changes to be implemented for the 2022 contracts. Regarding the budget period information’s exclusion from the 2023 contracts, department personnel indicated the intent in the contract template is for the contract term to be the budget period, as communicated through the budget attachment. For these specific contracts, however, the budget attachment does not include the budget period. Regarding the risk assessments, program personnel indicated they believe the 2022 risk assessment were completed but saved over when the 2023 risk assessments were started. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls over subrecipient monitoring for the Child Care Development Fund Cluster to ensure all award identification information is communicated to subrecipients, subrecipient risk assessments and associated audit report reviews are completed, and documentation is retained. B. Comply with federal subrecipient monitoring regulations and State Plan requirements by communicating all award identification information to subrecipients and by completing and retaining documentation of risk assessments and audit report reviews for subrecipients. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-039: U. S. Department of Education ALN #84.371 Comprehensive Literacy Development Program Grant #S371C190012, S371C190012-19A, S371C190012-20, S371C190012-21 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to “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.” Federal regulation, 2 CFR Part 200.403(a) and (g), require costs to be necessary and reasonable, as well as adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) subrecipient monitoring process related to the Comprehensive Literacy State Development Program did not include obtaining sufficient documentation on cash requests to ensure funds were used for allowable activities and costs as required by federal regulations. This is also a control deficiency related to activities allowed, allowable costs, and subrecipient monitoring. Questioned Costs: We question $659,331 of the cash requests we reviewed. There may be more questioned costs for items we did not review. Context: We sampled 22 cash requests from 10 Local Educational Agencies (LEAs) out of a population of 120 LEAs. The total amount of cash requested for these sample items was $886,597. The sample was not statistically valid. Twelve cash requests lacked adequate detail to determine if all the costs were for allowable activities and costs. Four of the errors, totaling $254,234 were related to the final cash requests, where there was no documentation on how the LEA spent the remaining funds. The other eight requests did not contain adequate support to ensure the costs were reasonable and necessary. For example, one cash request’s description said, “Lease payments for Literacy van to transport students to afterschool program.” The LEA requested $29,519, split between pre-k, elementary, middle, and high school. We do not believe the support had enough detail for the office to determine the time period covered by the request, if the lease payment was excessive, or if the lease was for more than one van. Effect: Without adequate controls over cash requests, the office has reimbursed subrecipients for expenses that may be unallowable, or unnecessary and unreasonable for performance of the federal award. The office did not comply with federal regulations related to activities allowed, allowable costs, and subrecipient monitoring. Cause: The office agrees that LEAs do not always providing sufficient descriptions in cash requests, but they noted program staff visited LEAs at least bi-monthly to physically review items that the money was spent on at the beginning of the grant, with continued visits as needed during the audit period. However, based on our follow up, the onsite reviews did not include reviewing the support the LEA retains for purchases related to cash requests. Instead, they focused on other subrecipient monitoring activities, such as reviewing evidence of the impact of expenditures, like improved reading scores. While useful, these activities do not address concerns about cash request documentation, because there is no evidence that the office reimbursed the actual amount spent. Recommendation: We recommend the Office of Public Instruction: A. Strengthen subrecipient monitoring internal controls to ensure subrecipient grant expenditures are for allowable costs and activities. B. Obtain sufficient documentation of subrecipient expenditures to ensure compliance with federal awards requirements. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains documentation, or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-040: U. S. Department of Education ALN #84.371 Comprehensive Literacy Development Program (Literacy) Grant #S371C190012 – 19A, S371C190012 – 20, S371C190012, and S371C190012– 21 Criteria: Federal regulation, 2 CFR 200.332(b), requires non-federal entities 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. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) subgrants funds to Local Educational Agencies (LEAs) for various federal programs. The office maintains one overall risk assessment spreadsheet for subrecipients for all programs (spreadsheet). The office does not have adequate controls to ensure Literacy program staff complete the Literacy Federal Program column of the risk assessment for all Literacy subrecipients. We identified four LEAs that did not have a risk evaluation during fiscal year 2022, as required by federal subrecipient monitoring requirements. Questioned Costs: No questioned costs identified. Context: In state fiscal years 2022 and 2023, 33 LEAs were allocated funds by the office for the Literacy Grant. The four LEAs not receiving a risk evaluation in fiscal year 2022 were allocated $854,412. Risk evaluations are important because they are used to determine the appropriate subrecipient monitoring. Our review included all 33 LEAs. In addition, the spreadsheet did not have documented risk levels for two LEAs in fiscal year 2023. The Literacy program personnel evaluated risk on a separate document and said they entered a risk level on the spreadsheet as well. However, the spreadsheet provided contained “NA” for the two LEAs. Internal audit staff use the risk levels on the spreadsheet, along with other information, to determine a LEA’s overall risk for the office and appropriate subrecipient monitoring procedures. Effect: The office does not have adequate controls in place to ensure all LEAs have a documented risk level on the final spreadsheet and the office was not in compliance with federal regulations during fiscal year 2022. When the spreadsheet is incomplete, subrecipient monitoring procedures may be inadequate and misspent funds may not be identified through subrecipient monitoring procedures. Cause: Department personnel agree there were subrecipients missed during fiscal year 2022 but are not sure why. The program staff and internal auditor were not involved in the risk assessment process at that time. In fiscal year 2023, program staff reported completing a risk level on the spreadsheet, but on the final spreadsheet line items in error said “NA”. This indicates the spreadsheet may have accidently gotten changed during the risk assessment process. Recommendation: We recommend the Office of Public Instruction: A. Enhance internal controls to ensure the overall risk assessment spreadsheet contains a risk level for all LEAs for the Comprehensive Literacy State Development program. B. Assess risk for all subrecipients receiving Comprehensive Literacy State Development funds, as required by federal regulations. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-039: U. S. Department of Education ALN #84.371 Comprehensive Literacy Development Program Grant #S371C190012, S371C190012-19A, S371C190012-20, S371C190012-21 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to “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.” Federal regulation, 2 CFR Part 200.403(a) and (g), require costs to be necessary and reasonable, as well as adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) subrecipient monitoring process related to the Comprehensive Literacy State Development Program did not include obtaining sufficient documentation on cash requests to ensure funds were used for allowable activities and costs as required by federal regulations. This is also a control deficiency related to activities allowed, allowable costs, and subrecipient monitoring. Questioned Costs: We question $659,331 of the cash requests we reviewed. There may be more questioned costs for items we did not review. Context: We sampled 22 cash requests from 10 Local Educational Agencies (LEAs) out of a population of 120 LEAs. The total amount of cash requested for these sample items was $886,597. The sample was not statistically valid. Twelve cash requests lacked adequate detail to determine if all the costs were for allowable activities and costs. Four of the errors, totaling $254,234 were related to the final cash requests, where there was no documentation on how the LEA spent the remaining funds. The other eight requests did not contain adequate support to ensure the costs were reasonable and necessary. For example, one cash request’s description said, “Lease payments for Literacy van to transport students to afterschool program.” The LEA requested $29,519, split between pre-k, elementary, middle, and high school. We do not believe the support had enough detail for the office to determine the time period covered by the request, if the lease payment was excessive, or if the lease was for more than one van. Effect: Without adequate controls over cash requests, the office has reimbursed subrecipients for expenses that may be unallowable, or unnecessary and unreasonable for performance of the federal award. The office did not comply with federal regulations related to activities allowed, allowable costs, and subrecipient monitoring. Cause: The office agrees that LEAs do not always providing sufficient descriptions in cash requests, but they noted program staff visited LEAs at least bi-monthly to physically review items that the money was spent on at the beginning of the grant, with continued visits as needed during the audit period. However, based on our follow up, the onsite reviews did not include reviewing the support the LEA retains for purchases related to cash requests. Instead, they focused on other subrecipient monitoring activities, such as reviewing evidence of the impact of expenditures, like improved reading scores. While useful, these activities do not address concerns about cash request documentation, because there is no evidence that the office reimbursed the actual amount spent. Recommendation: We recommend the Office of Public Instruction: A. Strengthen subrecipient monitoring internal controls to ensure subrecipient grant expenditures are for allowable costs and activities. B. Obtain sufficient documentation of subrecipient expenditures to ensure compliance with federal awards requirements. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains documentation, or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-040: U. S. Department of Education ALN #84.371 Comprehensive Literacy Development Program (Literacy) Grant #S371C190012 – 19A, S371C190012 – 20, S371C190012, and S371C190012– 21 Criteria: Federal regulation, 2 CFR 200.332(b), requires non-federal entities 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. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) subgrants funds to Local Educational Agencies (LEAs) for various federal programs. The office maintains one overall risk assessment spreadsheet for subrecipients for all programs (spreadsheet). The office does not have adequate controls to ensure Literacy program staff complete the Literacy Federal Program column of the risk assessment for all Literacy subrecipients. We identified four LEAs that did not have a risk evaluation during fiscal year 2022, as required by federal subrecipient monitoring requirements. Questioned Costs: No questioned costs identified. Context: In state fiscal years 2022 and 2023, 33 LEAs were allocated funds by the office for the Literacy Grant. The four LEAs not receiving a risk evaluation in fiscal year 2022 were allocated $854,412. Risk evaluations are important because they are used to determine the appropriate subrecipient monitoring. Our review included all 33 LEAs. In addition, the spreadsheet did not have documented risk levels for two LEAs in fiscal year 2023. The Literacy program personnel evaluated risk on a separate document and said they entered a risk level on the spreadsheet as well. However, the spreadsheet provided contained “NA” for the two LEAs. Internal audit staff use the risk levels on the spreadsheet, along with other information, to determine a LEA’s overall risk for the office and appropriate subrecipient monitoring procedures. Effect: The office does not have adequate controls in place to ensure all LEAs have a documented risk level on the final spreadsheet and the office was not in compliance with federal regulations during fiscal year 2022. When the spreadsheet is incomplete, subrecipient monitoring procedures may be inadequate and misspent funds may not be identified through subrecipient monitoring procedures. Cause: Department personnel agree there were subrecipients missed during fiscal year 2022 but are not sure why. The program staff and internal auditor were not involved in the risk assessment process at that time. In fiscal year 2023, program staff reported completing a risk level on the spreadsheet, but on the final spreadsheet line items in error said “NA”. This indicates the spreadsheet may have accidently gotten changed during the risk assessment process. Recommendation: We recommend the Office of Public Instruction: A. Enhance internal controls to ensure the overall risk assessment spreadsheet contains a risk level for all LEAs for the Comprehensive Literacy State Development program. B. Assess risk for all subrecipients receiving Comprehensive Literacy State Development funds, as required by federal regulations. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-015: U.S. Department of the Treasury ALN #21.027, Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Grant #SLFRP1747 Criteria: Federal regulation, 2 CFR 200.332, requires pass-through entities, as part of subrecipient monitoring, 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 monitoring. The activities of the subrecipient must then be monitored as necessary to ensure compliance. Pass-through entities are also responsible for verifying every subrecipient that expends $750,000 in federal awards in a fiscal year is audited. Non-federal entities are required to follow up on and resolve any findings pertaining to the federal award identified by these audits. Federal regulation, 2 CFR 200.303, requires non-federal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Department of Natural Resources and Conservation (department) did not have sufficient controls to ensure every subrecipient receiving State and Local Fiscal Recovery Fund (SLFRF) grant funds was evaluated for risk of noncompliance or reviewed for the applicability of single audit requirements, as required by federal regulations. Questioned Costs: No questioned costs identified. Context: As part of administering the SLFRF program, which was a new grant program for the department, subawards were made to local governments to improve drinking water access and support wastewater and stormwater infrastructure. We sampled 45 of 655 grant expenditure transactions totaling approximately $18.5 million. The sample was not statistically valid. We reviewed the subawards to determine if department controls were effective and if the department complied with program requirements. We found six local governments, affecting seven subawards, where the department did not obtain all information necessary to complete their risk assessments. In addition, due to the missing information on the risk assessments, the applicability of single audit requirements was not determined for those six local governments. Effect: Due to internal control deficiencies, the department did not comply with all subrecipient monitoring requirements for fiscal years 2022 and 2023. In addition, not establishing monitoring procedures based on a subrecipient’s risk level increases the risk of funds being used for unallowable costs, also increasing the department’s risk of noncompliance with other federal regulations. Cause: Based on our work and discussions with department staff, processes were in place to gather the necessary data, evaluate risk, and to determine the applicability of single audit requirements. However, these processes relied on subrecipient participation in a survey. If a survey was not returned, the risk assessment process remained incomplete, and the applicability of single audit requirements were not determined. The department did not establish procedures to address unreturned surveys. Recommendation: We recommend the Department of Natural Resources and Conservation: A) Enhance internal controls to ensure every subrecipient is evaluated for risk of noncompliance and reviewed for the applicability of single audit requirements. B) Perform all subrecipient monitoring activities as required by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department disagrees with the interpretation that subrecipient monitoring activities must occur within a specified time period and believes controls were in place during the audit period. In addition, because the department’s policy is to assign every subrecipient the same risk level until an assessment is completed, it believes it is following subrecipient monitoring requirements. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Assigning all subrecipients a common risk level is not the same as evaluating each subrecipient’s risk for the purpose of determining appropriate subrecipient monitoring. In addition, the department is subject to federal time requirements specific to monitoring subrecipient single audit reports. The subrecipient’s risk of noncompliance and single audit requirements are only documented as part of the risk assessment process, which was not completed for six subrecipients tested. In addition, four of the grants closed without this process being completed. As such, our recommendation stands.
Finding 2023-074: U.S. Department of Homeland Security ALN #97.036, Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Grant #4508DRMTP00000001, 4608DRMTP00000001, 4623DRMTP00000001, 4655DRMTP00000001 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to communicate to subrecipients to properly identify the federal award. Federal regulation, 2 CFR 200.332(d), requires the Department of Military Affairs (department) to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department communicated the Agency Listing Number (ALN) for the disaster grant to some, but not all, of the subrecipients through an award letter. Additionally, the department did not review subrecipient audit reports as required by federal regulations. The department does not have adequate controls in place to ensure that either of these two things occurred. Questioned Costs: No questioned costs identified. Context: The department subgrants funds to cities, counties, and non-profit entities. During the audit, we reviewed expenditures related to four disasters, awarded to 32 entities. We judgmentally sampled payments made to 14 of these entities and found eight were not provided the ALN. This sample was not statistically valid. We did not complete a sample related to subrecipient monitoring as the department does not have procedures in place to review audit reports for any entity. Effect: Subrecipients may not be fully aware or adhere to all relevant federal regulations related to the grant if they do not receive the correct ALN, increasing the risk of non-compliance. Furthermore, subrecipients lack essential data to accurately report their federal awards on their Schedule of Expenditures of Federal Awards. Additionally, the department's failure to review audit reports from subrecipients has led to a lack of awareness of findings related to department grants or other federal grants with similar requirements. Consequently, the department has not issued management letters or requested corrective action plans as required. This deficiency has left the department without the necessary information to implement proper monitoring procedures for federal compliance at the subrecipient level, which increases the risk of misallocation of federal funds by subrecipients. Cause: During the audit period, department turnover resulted in the omission of the ALN in some award letters. The department and subrecipient meet prior to a grant award to determine if there are any risks at the entity applying for a grant. The department was unaware of the federal requirement to review audit reports as part of its monitoring procedures. Recommendation: We recommend the Department of Military Affairs: A. Implement controls to ensure the ALN is communicated to subrecipients when awarding grants and subrecipient audit reports are obtained and reviewed. B. Communicate the ALN to all subrecipients awarded disaster funds. C. Obtain and review audit reports of entities receiving grants. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-074: U.S. Department of Homeland Security ALN #97.036, Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Grant #4508DRMTP00000001, 4608DRMTP00000001, 4623DRMTP00000001, 4655DRMTP00000001 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to communicate to subrecipients to properly identify the federal award. Federal regulation, 2 CFR 200.332(d), requires the Department of Military Affairs (department) to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department communicated the Agency Listing Number (ALN) for the disaster grant to some, but not all, of the subrecipients through an award letter. Additionally, the department did not review subrecipient audit reports as required by federal regulations. The department does not have adequate controls in place to ensure that either of these two things occurred. Questioned Costs: No questioned costs identified. Context: The department subgrants funds to cities, counties, and non-profit entities. During the audit, we reviewed expenditures related to four disasters, awarded to 32 entities. We judgmentally sampled payments made to 14 of these entities and found eight were not provided the ALN. This sample was not statistically valid. We did not complete a sample related to subrecipient monitoring as the department does not have procedures in place to review audit reports for any entity. Effect: Subrecipients may not be fully aware or adhere to all relevant federal regulations related to the grant if they do not receive the correct ALN, increasing the risk of non-compliance. Furthermore, subrecipients lack essential data to accurately report their federal awards on their Schedule of Expenditures of Federal Awards. Additionally, the department's failure to review audit reports from subrecipients has led to a lack of awareness of findings related to department grants or other federal grants with similar requirements. Consequently, the department has not issued management letters or requested corrective action plans as required. This deficiency has left the department without the necessary information to implement proper monitoring procedures for federal compliance at the subrecipient level, which increases the risk of misallocation of federal funds by subrecipients. Cause: During the audit period, department turnover resulted in the omission of the ALN in some award letters. The department and subrecipient meet prior to a grant award to determine if there are any risks at the entity applying for a grant. The department was unaware of the federal requirement to review audit reports as part of its monitoring procedures. Recommendation: We recommend the Department of Military Affairs: A. Implement controls to ensure the ALN is communicated to subrecipients when awarding grants and subrecipient audit reports are obtained and reviewed. B. Communicate the ALN to all subrecipients awarded disaster funds. C. Obtain and review audit reports of entities receiving grants. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-074: U.S. Department of Homeland Security ALN #97.036, Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Grant #4508DRMTP00000001, 4608DRMTP00000001, 4623DRMTP00000001, 4655DRMTP00000001 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to communicate to subrecipients to properly identify the federal award. Federal regulation, 2 CFR 200.332(d), requires the Department of Military Affairs (department) to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department communicated the Agency Listing Number (ALN) for the disaster grant to some, but not all, of the subrecipients through an award letter. Additionally, the department did not review subrecipient audit reports as required by federal regulations. The department does not have adequate controls in place to ensure that either of these two things occurred. Questioned Costs: No questioned costs identified. Context: The department subgrants funds to cities, counties, and non-profit entities. During the audit, we reviewed expenditures related to four disasters, awarded to 32 entities. We judgmentally sampled payments made to 14 of these entities and found eight were not provided the ALN. This sample was not statistically valid. We did not complete a sample related to subrecipient monitoring as the department does not have procedures in place to review audit reports for any entity. Effect: Subrecipients may not be fully aware or adhere to all relevant federal regulations related to the grant if they do not receive the correct ALN, increasing the risk of non-compliance. Furthermore, subrecipients lack essential data to accurately report their federal awards on their Schedule of Expenditures of Federal Awards. Additionally, the department's failure to review audit reports from subrecipients has led to a lack of awareness of findings related to department grants or other federal grants with similar requirements. Consequently, the department has not issued management letters or requested corrective action plans as required. This deficiency has left the department without the necessary information to implement proper monitoring procedures for federal compliance at the subrecipient level, which increases the risk of misallocation of federal funds by subrecipients. Cause: During the audit period, department turnover resulted in the omission of the ALN in some award letters. The department and subrecipient meet prior to a grant award to determine if there are any risks at the entity applying for a grant. The department was unaware of the federal requirement to review audit reports as part of its monitoring procedures. Recommendation: We recommend the Department of Military Affairs: A. Implement controls to ensure the ALN is communicated to subrecipients when awarding grants and subrecipient audit reports are obtained and reviewed. B. Communicate the ALN to all subrecipients awarded disaster funds. C. Obtain and review audit reports of entities receiving grants. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-074: U.S. Department of Homeland Security ALN #97.036, Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Grant #4508DRMTP00000001, 4608DRMTP00000001, 4623DRMTP00000001, 4655DRMTP00000001 Criteria: Federal regulation, 2 CFR 200.332(a)(1), lays out the fourteen required elements to communicate to subrecipients to properly identify the federal award. Federal regulation, 2 CFR 200.332(d), requires the Department of Military Affairs (department) to monitor the subrecipient’s activities, including reviewing reports and resolving Single Audit findings related to the subaward. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department communicated the Agency Listing Number (ALN) for the disaster grant to some, but not all, of the subrecipients through an award letter. Additionally, the department did not review subrecipient audit reports as required by federal regulations. The department does not have adequate controls in place to ensure that either of these two things occurred. Questioned Costs: No questioned costs identified. Context: The department subgrants funds to cities, counties, and non-profit entities. During the audit, we reviewed expenditures related to four disasters, awarded to 32 entities. We judgmentally sampled payments made to 14 of these entities and found eight were not provided the ALN. This sample was not statistically valid. We did not complete a sample related to subrecipient monitoring as the department does not have procedures in place to review audit reports for any entity. Effect: Subrecipients may not be fully aware or adhere to all relevant federal regulations related to the grant if they do not receive the correct ALN, increasing the risk of non-compliance. Furthermore, subrecipients lack essential data to accurately report their federal awards on their Schedule of Expenditures of Federal Awards. Additionally, the department's failure to review audit reports from subrecipients has led to a lack of awareness of findings related to department grants or other federal grants with similar requirements. Consequently, the department has not issued management letters or requested corrective action plans as required. This deficiency has left the department without the necessary information to implement proper monitoring procedures for federal compliance at the subrecipient level, which increases the risk of misallocation of federal funds by subrecipients. Cause: During the audit period, department turnover resulted in the omission of the ALN in some award letters. The department and subrecipient meet prior to a grant award to determine if there are any risks at the entity applying for a grant. The department was unaware of the federal requirement to review audit reports as part of its monitoring procedures. Recommendation: We recommend the Department of Military Affairs: A. Implement controls to ensure the ALN is communicated to subrecipients when awarding grants and subrecipient audit reports are obtained and reviewed. B. Communicate the ALN to all subrecipients awarded disaster funds. C. Obtain and review audit reports of entities receiving grants. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-032: U.S. Department of Education ALN #84.425D and #84.425U, Education Stabilization Fund (ESF) (COVID-19) Grant #S425D200006, S425D210006, and S452U210006-21A Criteria: Federal regulation, 2CFR 200.332(d), requires pass through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." The Office of Management and Budget 2022 Compliance Supplement (compliance supplement), ESF Program (Section III, Part F-Equipment /Real Property Management) explains that construction projects using Elementary and Secondary School Emergency Relief Fund (ESSER funds) must meet Davis-Bacon prevailing wage requirements, meaning they must pay wages based on federal requirements. A memo from the Department of Education related to Davis-Bacon released April 2023 further clarified that states should be collecting and monitoring all Local Educational Agencies’ (LEA) wage certifications. The compliance supplement (Section III, Part A Activities Allowed or Unallowed) also requires costs to be consistent with the purpose of the ESF, “to prevent, prepare for, and respond to COVID-19”. Federal regulation, 2 CFR 200.403 (a) and (g), requires allowable costs to be “necessary and reasonable for the performance of the Federal award” and to be “adequately documented”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: ESSER is part of the ESF. The Office of Public Instruction’s (office) controls were not sufficient to prevent, or detect and correct, noncompliance with federal requirements during the audit period. The office assessed subrecipients risk, reviewed audit reports for LEAs whose audits included ESSER as a major program, and required subrecipients to document their use of ESSER funds on cash requests. However, the office did not comply with federal allowable cost regulations. This is because they did not require documentation beyond the cash requests to ensure those expenditures followed ESSER program requirements. Examples include being related to the COVID-19 pandemic, being reasonable and necessary, and complying with equipment and construction requirements. In addition, the office did not complete any after the award monitoring, including collecting Davis-Bacon wage certifications related to subrecipients’ construction projects as required by federal regulations. Questioned Costs: We question costs of over $52 million. Specifically, $19,748,561 for 84.425D (ESSER I and II) and $32,288,058 for 84.425U (ESSER III). We calculated this amount by summing the payments from the cash draws we tested that lacked sufficient documentation. The potential questioned costs could be higher since our testing was limited to cash requests over $1 million. Context: During the audit period, over $257 million of ESSER grants were paid to LEAs. We tested 27 ESSER cash requests over $1 million each in fiscal years 2022 and 2023. Total payments made to subrecipients from these cash draws exceeded $77 million. We first considered support retained at the office. We also requested further support from LEAs in an attempt to consider all information available. Not all requested support was provided. We reviewed what was provided as part of our testing. This was not a sample as we tested all cash requests above $1 million. Each cash request contained a variety of items on the same request. We noted the following: • Documentation in 12 out of the 27 cash requests tested did not indicate how the expenses related to preventing, preparing for, and responding to COVID-19 pandemic. • 14 out of the 27 cash requests tested did not have enough detail to determine if the costs were reasonable and necessary. • 12 of the cash requests reviewed involved construction and the office did not review any wage certifications during the audit period. In addition, there was no monitoring of LEAs’ compliance related to equipment and real property management requirements beyond compliance certifications by the LEAs. • Descriptions on two cash requests indicated ESSER funds were spent on items we believe are unreasonable or have no clear connection to the pandemic. These costs include t-shirts for a new teacher event and massage chairs for a teacher’s lounge. Overall, the cash requests are more detailed than in the prior audit, but they still are not sufficient to meet the office’s obligation to ensure subrecipients’ compliance with federal regulations. In addition, fiscal year 2023 was the third year of ESSER spending, indicating there has been time to set up an after the award subrecipient monitoring program. Repeat Finding: This is a repeat finding and was reported as Single Audit finding 2021-036 in the audit for the two fiscal years ended June 30, 2021. Effect: The office is not in compliance with federal regulations and subrecipients may have spent ESSER funds on activities not allowed by federal requirements, to prevent, prepare for, and respond to the coronavirus pandemic, or on items that are not necessary and reasonable for the performance of the federal award. Cause: The office believes there was sufficient detail on the cash requests for the office to decide on the reasonableness, necessity, and allowability under ESSER regulations. The office agrees that subrecipient monitoring was not sufficient during the audit period, but since there are three funding sources that all have the same allowable uses, personnel decided they would monitor all phases of the grant using one self-assessment. The office sent out a monitoring survey at the end of the audit period, but no responses had been received during fiscal year 2023. The office noted that they will conduct additional monitoring, particularly for unique activities like construction projects, to ensure ESSER compliance. ESSER is defined in the compliance supplement as a “higher risk” federal program, because of the additional risk associated with certain COVID-19 funding. We believe the office’s decision to monitor three years into the grant is not sufficient for the following reasons: • LEAs spent funds on unusual activity, like construction projects. These projects have different compliance requirements than the other federal grants most LEAs receive. • Less than 20 percent of LEA ESSER subrecipients will receive an audit that requires any federal compliance testing. • If the office finds issues this late in the grant process, it will be difficult to recover funds from LEAs. We believe federal requirements direct the office to use a combination of sufficient documentation at the time of disbursement and strong monitoring procedures to ensure LEAs properly comply with applicable allowable cost requirements. Recommendation: We recommend the Office of Public Instruction: A. Strengthen internal controls to ensure subrecipient grant expenditures comply with federal program requirements. B. Obtain sufficient documentation of subrecipient expenditures to ensure costs are related to the pandemic and are reasonable and necessary for performance of the federal award. C. Monitor subrecipients’ compliance with construction and equipment requirements, including reviewing wage certifications for construction projects. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-032: U.S. Department of Education ALN #84.425D and #84.425U, Education Stabilization Fund (ESF) (COVID-19) Grant #S425D200006, S425D210006, and S452U210006-21A Criteria: Federal regulation, 2CFR 200.332(d), requires pass through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." The Office of Management and Budget 2022 Compliance Supplement (compliance supplement), ESF Program (Section III, Part F-Equipment /Real Property Management) explains that construction projects using Elementary and Secondary School Emergency Relief Fund (ESSER funds) must meet Davis-Bacon prevailing wage requirements, meaning they must pay wages based on federal requirements. A memo from the Department of Education related to Davis-Bacon released April 2023 further clarified that states should be collecting and monitoring all Local Educational Agencies’ (LEA) wage certifications. The compliance supplement (Section III, Part A Activities Allowed or Unallowed) also requires costs to be consistent with the purpose of the ESF, “to prevent, prepare for, and respond to COVID-19”. Federal regulation, 2 CFR 200.403 (a) and (g), requires allowable costs to be “necessary and reasonable for the performance of the Federal award” and to be “adequately documented”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: ESSER is part of the ESF. The Office of Public Instruction’s (office) controls were not sufficient to prevent, or detect and correct, noncompliance with federal requirements during the audit period. The office assessed subrecipients risk, reviewed audit reports for LEAs whose audits included ESSER as a major program, and required subrecipients to document their use of ESSER funds on cash requests. However, the office did not comply with federal allowable cost regulations. This is because they did not require documentation beyond the cash requests to ensure those expenditures followed ESSER program requirements. Examples include being related to the COVID-19 pandemic, being reasonable and necessary, and complying with equipment and construction requirements. In addition, the office did not complete any after the award monitoring, including collecting Davis-Bacon wage certifications related to subrecipients’ construction projects as required by federal regulations. Questioned Costs: We question costs of over $52 million. Specifically, $19,748,561 for 84.425D (ESSER I and II) and $32,288,058 for 84.425U (ESSER III). We calculated this amount by summing the payments from the cash draws we tested that lacked sufficient documentation. The potential questioned costs could be higher since our testing was limited to cash requests over $1 million. Context: During the audit period, over $257 million of ESSER grants were paid to LEAs. We tested 27 ESSER cash requests over $1 million each in fiscal years 2022 and 2023. Total payments made to subrecipients from these cash draws exceeded $77 million. We first considered support retained at the office. We also requested further support from LEAs in an attempt to consider all information available. Not all requested support was provided. We reviewed what was provided as part of our testing. This was not a sample as we tested all cash requests above $1 million. Each cash request contained a variety of items on the same request. We noted the following: • Documentation in 12 out of the 27 cash requests tested did not indicate how the expenses related to preventing, preparing for, and responding to COVID-19 pandemic. • 14 out of the 27 cash requests tested did not have enough detail to determine if the costs were reasonable and necessary. • 12 of the cash requests reviewed involved construction and the office did not review any wage certifications during the audit period. In addition, there was no monitoring of LEAs’ compliance related to equipment and real property management requirements beyond compliance certifications by the LEAs. • Descriptions on two cash requests indicated ESSER funds were spent on items we believe are unreasonable or have no clear connection to the pandemic. These costs include t-shirts for a new teacher event and massage chairs for a teacher’s lounge. Overall, the cash requests are more detailed than in the prior audit, but they still are not sufficient to meet the office’s obligation to ensure subrecipients’ compliance with federal regulations. In addition, fiscal year 2023 was the third year of ESSER spending, indicating there has been time to set up an after the award subrecipient monitoring program. Repeat Finding: This is a repeat finding and was reported as Single Audit finding 2021-036 in the audit for the two fiscal years ended June 30, 2021. Effect: The office is not in compliance with federal regulations and subrecipients may have spent ESSER funds on activities not allowed by federal requirements, to prevent, prepare for, and respond to the coronavirus pandemic, or on items that are not necessary and reasonable for the performance of the federal award. Cause: The office believes there was sufficient detail on the cash requests for the office to decide on the reasonableness, necessity, and allowability under ESSER regulations. The office agrees that subrecipient monitoring was not sufficient during the audit period, but since there are three funding sources that all have the same allowable uses, personnel decided they would monitor all phases of the grant using one self-assessment. The office sent out a monitoring survey at the end of the audit period, but no responses had been received during fiscal year 2023. The office noted that they will conduct additional monitoring, particularly for unique activities like construction projects, to ensure ESSER compliance. ESSER is defined in the compliance supplement as a “higher risk” federal program, because of the additional risk associated with certain COVID-19 funding. We believe the office’s decision to monitor three years into the grant is not sufficient for the following reasons: • LEAs spent funds on unusual activity, like construction projects. These projects have different compliance requirements than the other federal grants most LEAs receive. • Less than 20 percent of LEA ESSER subrecipients will receive an audit that requires any federal compliance testing. • If the office finds issues this late in the grant process, it will be difficult to recover funds from LEAs. We believe federal requirements direct the office to use a combination of sufficient documentation at the time of disbursement and strong monitoring procedures to ensure LEAs properly comply with applicable allowable cost requirements. Recommendation: We recommend the Office of Public Instruction: A. Strengthen internal controls to ensure subrecipient grant expenditures comply with federal program requirements. B. Obtain sufficient documentation of subrecipient expenditures to ensure costs are related to the pandemic and are reasonable and necessary for performance of the federal award. C. Monitor subrecipients’ compliance with construction and equipment requirements, including reviewing wage certifications for construction projects. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-032: U.S. Department of Education ALN #84.425D and #84.425U, Education Stabilization Fund (ESF) (COVID-19) Grant #S425D200006, S425D210006, and S452U210006-21A Criteria: Federal regulation, 2CFR 200.332(d), requires pass through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." The Office of Management and Budget 2022 Compliance Supplement (compliance supplement), ESF Program (Section III, Part F-Equipment /Real Property Management) explains that construction projects using Elementary and Secondary School Emergency Relief Fund (ESSER funds) must meet Davis-Bacon prevailing wage requirements, meaning they must pay wages based on federal requirements. A memo from the Department of Education related to Davis-Bacon released April 2023 further clarified that states should be collecting and monitoring all Local Educational Agencies’ (LEA) wage certifications. The compliance supplement (Section III, Part A Activities Allowed or Unallowed) also requires costs to be consistent with the purpose of the ESF, “to prevent, prepare for, and respond to COVID-19”. Federal regulation, 2 CFR 200.403 (a) and (g), requires allowable costs to be “necessary and reasonable for the performance of the Federal award” and to be “adequately documented”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: ESSER is part of the ESF. The Office of Public Instruction’s (office) controls were not sufficient to prevent, or detect and correct, noncompliance with federal requirements during the audit period. The office assessed subrecipients risk, reviewed audit reports for LEAs whose audits included ESSER as a major program, and required subrecipients to document their use of ESSER funds on cash requests. However, the office did not comply with federal allowable cost regulations. This is because they did not require documentation beyond the cash requests to ensure those expenditures followed ESSER program requirements. Examples include being related to the COVID-19 pandemic, being reasonable and necessary, and complying with equipment and construction requirements. In addition, the office did not complete any after the award monitoring, including collecting Davis-Bacon wage certifications related to subrecipients’ construction projects as required by federal regulations. Questioned Costs: We question costs of over $52 million. Specifically, $19,748,561 for 84.425D (ESSER I and II) and $32,288,058 for 84.425U (ESSER III). We calculated this amount by summing the payments from the cash draws we tested that lacked sufficient documentation. The potential questioned costs could be higher since our testing was limited to cash requests over $1 million. Context: During the audit period, over $257 million of ESSER grants were paid to LEAs. We tested 27 ESSER cash requests over $1 million each in fiscal years 2022 and 2023. Total payments made to subrecipients from these cash draws exceeded $77 million. We first considered support retained at the office. We also requested further support from LEAs in an attempt to consider all information available. Not all requested support was provided. We reviewed what was provided as part of our testing. This was not a sample as we tested all cash requests above $1 million. Each cash request contained a variety of items on the same request. We noted the following: • Documentation in 12 out of the 27 cash requests tested did not indicate how the expenses related to preventing, preparing for, and responding to COVID-19 pandemic. • 14 out of the 27 cash requests tested did not have enough detail to determine if the costs were reasonable and necessary. • 12 of the cash requests reviewed involved construction and the office did not review any wage certifications during the audit period. In addition, there was no monitoring of LEAs’ compliance related to equipment and real property management requirements beyond compliance certifications by the LEAs. • Descriptions on two cash requests indicated ESSER funds were spent on items we believe are unreasonable or have no clear connection to the pandemic. These costs include t-shirts for a new teacher event and massage chairs for a teacher’s lounge. Overall, the cash requests are more detailed than in the prior audit, but they still are not sufficient to meet the office’s obligation to ensure subrecipients’ compliance with federal regulations. In addition, fiscal year 2023 was the third year of ESSER spending, indicating there has been time to set up an after the award subrecipient monitoring program. Repeat Finding: This is a repeat finding and was reported as Single Audit finding 2021-036 in the audit for the two fiscal years ended June 30, 2021. Effect: The office is not in compliance with federal regulations and subrecipients may have spent ESSER funds on activities not allowed by federal requirements, to prevent, prepare for, and respond to the coronavirus pandemic, or on items that are not necessary and reasonable for the performance of the federal award. Cause: The office believes there was sufficient detail on the cash requests for the office to decide on the reasonableness, necessity, and allowability under ESSER regulations. The office agrees that subrecipient monitoring was not sufficient during the audit period, but since there are three funding sources that all have the same allowable uses, personnel decided they would monitor all phases of the grant using one self-assessment. The office sent out a monitoring survey at the end of the audit period, but no responses had been received during fiscal year 2023. The office noted that they will conduct additional monitoring, particularly for unique activities like construction projects, to ensure ESSER compliance. ESSER is defined in the compliance supplement as a “higher risk” federal program, because of the additional risk associated with certain COVID-19 funding. We believe the office’s decision to monitor three years into the grant is not sufficient for the following reasons: • LEAs spent funds on unusual activity, like construction projects. These projects have different compliance requirements than the other federal grants most LEAs receive. • Less than 20 percent of LEA ESSER subrecipients will receive an audit that requires any federal compliance testing. • If the office finds issues this late in the grant process, it will be difficult to recover funds from LEAs. We believe federal requirements direct the office to use a combination of sufficient documentation at the time of disbursement and strong monitoring procedures to ensure LEAs properly comply with applicable allowable cost requirements. Recommendation: We recommend the Office of Public Instruction: A. Strengthen internal controls to ensure subrecipient grant expenditures comply with federal program requirements. B. Obtain sufficient documentation of subrecipient expenditures to ensure costs are related to the pandemic and are reasonable and necessary for performance of the federal award. C. Monitor subrecipients’ compliance with construction and equipment requirements, including reviewing wage certifications for construction projects. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-032: U.S. Department of Education ALN #84.425D and #84.425U, Education Stabilization Fund (ESF) (COVID-19) Grant #S425D200006, S425D210006, and S452U210006-21A Criteria: Federal regulation, 2CFR 200.332(d), requires pass through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." The Office of Management and Budget 2022 Compliance Supplement (compliance supplement), ESF Program (Section III, Part F-Equipment /Real Property Management) explains that construction projects using Elementary and Secondary School Emergency Relief Fund (ESSER funds) must meet Davis-Bacon prevailing wage requirements, meaning they must pay wages based on federal requirements. A memo from the Department of Education related to Davis-Bacon released April 2023 further clarified that states should be collecting and monitoring all Local Educational Agencies’ (LEA) wage certifications. The compliance supplement (Section III, Part A Activities Allowed or Unallowed) also requires costs to be consistent with the purpose of the ESF, “to prevent, prepare for, and respond to COVID-19”. Federal regulation, 2 CFR 200.403 (a) and (g), requires allowable costs to be “necessary and reasonable for the performance of the Federal award” and to be “adequately documented”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: ESSER is part of the ESF. The Office of Public Instruction’s (office) controls were not sufficient to prevent, or detect and correct, noncompliance with federal requirements during the audit period. The office assessed subrecipients risk, reviewed audit reports for LEAs whose audits included ESSER as a major program, and required subrecipients to document their use of ESSER funds on cash requests. However, the office did not comply with federal allowable cost regulations. This is because they did not require documentation beyond the cash requests to ensure those expenditures followed ESSER program requirements. Examples include being related to the COVID-19 pandemic, being reasonable and necessary, and complying with equipment and construction requirements. In addition, the office did not complete any after the award monitoring, including collecting Davis-Bacon wage certifications related to subrecipients’ construction projects as required by federal regulations. Questioned Costs: We question costs of over $52 million. Specifically, $19,748,561 for 84.425D (ESSER I and II) and $32,288,058 for 84.425U (ESSER III). We calculated this amount by summing the payments from the cash draws we tested that lacked sufficient documentation. The potential questioned costs could be higher since our testing was limited to cash requests over $1 million. Context: During the audit period, over $257 million of ESSER grants were paid to LEAs. We tested 27 ESSER cash requests over $1 million each in fiscal years 2022 and 2023. Total payments made to subrecipients from these cash draws exceeded $77 million. We first considered support retained at the office. We also requested further support from LEAs in an attempt to consider all information available. Not all requested support was provided. We reviewed what was provided as part of our testing. This was not a sample as we tested all cash requests above $1 million. Each cash request contained a variety of items on the same request. We noted the following: • Documentation in 12 out of the 27 cash requests tested did not indicate how the expenses related to preventing, preparing for, and responding to COVID-19 pandemic. • 14 out of the 27 cash requests tested did not have enough detail to determine if the costs were reasonable and necessary. • 12 of the cash requests reviewed involved construction and the office did not review any wage certifications during the audit period. In addition, there was no monitoring of LEAs’ compliance related to equipment and real property management requirements beyond compliance certifications by the LEAs. • Descriptions on two cash requests indicated ESSER funds were spent on items we believe are unreasonable or have no clear connection to the pandemic. These costs include t-shirts for a new teacher event and massage chairs for a teacher’s lounge. Overall, the cash requests are more detailed than in the prior audit, but they still are not sufficient to meet the office’s obligation to ensure subrecipients’ compliance with federal regulations. In addition, fiscal year 2023 was the third year of ESSER spending, indicating there has been time to set up an after the award subrecipient monitoring program. Repeat Finding: This is a repeat finding and was reported as Single Audit finding 2021-036 in the audit for the two fiscal years ended June 30, 2021. Effect: The office is not in compliance with federal regulations and subrecipients may have spent ESSER funds on activities not allowed by federal requirements, to prevent, prepare for, and respond to the coronavirus pandemic, or on items that are not necessary and reasonable for the performance of the federal award. Cause: The office believes there was sufficient detail on the cash requests for the office to decide on the reasonableness, necessity, and allowability under ESSER regulations. The office agrees that subrecipient monitoring was not sufficient during the audit period, but since there are three funding sources that all have the same allowable uses, personnel decided they would monitor all phases of the grant using one self-assessment. The office sent out a monitoring survey at the end of the audit period, but no responses had been received during fiscal year 2023. The office noted that they will conduct additional monitoring, particularly for unique activities like construction projects, to ensure ESSER compliance. ESSER is defined in the compliance supplement as a “higher risk” federal program, because of the additional risk associated with certain COVID-19 funding. We believe the office’s decision to monitor three years into the grant is not sufficient for the following reasons: • LEAs spent funds on unusual activity, like construction projects. These projects have different compliance requirements than the other federal grants most LEAs receive. • Less than 20 percent of LEA ESSER subrecipients will receive an audit that requires any federal compliance testing. • If the office finds issues this late in the grant process, it will be difficult to recover funds from LEAs. We believe federal requirements direct the office to use a combination of sufficient documentation at the time of disbursement and strong monitoring procedures to ensure LEAs properly comply with applicable allowable cost requirements. Recommendation: We recommend the Office of Public Instruction: A. Strengthen internal controls to ensure subrecipient grant expenditures comply with federal program requirements. B. Obtain sufficient documentation of subrecipient expenditures to ensure costs are related to the pandemic and are reasonable and necessary for performance of the federal award. C. Monitor subrecipients’ compliance with construction and equipment requirements, including reviewing wage certifications for construction projects. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-014: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.332, specifies the 14 required elements to communicate to subrecipients, the requirements for risk assessments, and monitoring during and after the award to ensure subrecipient compliance. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Montana Department of Transportation (department) did not ensure subrecipients of the Formula Grants for Rural Areas program funds were provided required information to identify their subaward or consistently assess and respond to risk levels for subrecipients, contrary to federal regulations. Previously reported internal control deficiencies continue to require improvement. Questioned Costs: No questioned costs identified. Context: The department provides operating and capital grant awards to subrecipients. The department’s 44 subrecipients include local government transit authorities, nonprofit organizations, and operators of public transportation or intercity bus services. As part of our audit, we conducted two samples to review various subrecipient monitoring requirements including award notification, risk assessment, and subrecipient reviews. Neither sample was statistically valid. In our sample of eight subrecipients that received federal funding during the audit period, we determined: • The department did not assess a risk level or perform post-award monitoring for two subrecipients. • The department, after assessing a higher level of risk to one subrecipient, did not conduct increased monitoring. Department policy requires staff perform additional reviews of all the subrecipient’s quarterly reports when higher risk levels are assigned. In our second sample, we reviewed five of 15 vehicle purchases made during the audit period. We determined two contracts did not contain the 14 elements, which include award identification and requirements, the department is required to communicate to subrecipients. Repeat Finding: This is a repeat finding and was reported as a Single Audit finding 2021-004 in the audit for the two fiscal years ended June 30, 2021. Effect: Without efficient internal controls over compliance to ensure all elements of subrecipient monitoring are followed, the department is noncompliant with federal regulations. Additionally, noncompliance with subrecipient monitoring could result in undetected noncompliance on the part of the subrecipients and potentially unidentified questioned costs. Cause: Department staff identified turnover and the need for training as reasons for the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure subrecipient monitoring is completed following department policy and procedure and federal subrecipient monitoring requirements. B. Perform and document risk assessments for subrecipients. C. Perform enhanced monitoring in response to higher assessed subrecipient risk levels. D. Include required elements in subaward agreements for vehicle purchases. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-014: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.332, specifies the 14 required elements to communicate to subrecipients, the requirements for risk assessments, and monitoring during and after the award to ensure subrecipient compliance. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Montana Department of Transportation (department) did not ensure subrecipients of the Formula Grants for Rural Areas program funds were provided required information to identify their subaward or consistently assess and respond to risk levels for subrecipients, contrary to federal regulations. Previously reported internal control deficiencies continue to require improvement. Questioned Costs: No questioned costs identified. Context: The department provides operating and capital grant awards to subrecipients. The department’s 44 subrecipients include local government transit authorities, nonprofit organizations, and operators of public transportation or intercity bus services. As part of our audit, we conducted two samples to review various subrecipient monitoring requirements including award notification, risk assessment, and subrecipient reviews. Neither sample was statistically valid. In our sample of eight subrecipients that received federal funding during the audit period, we determined: • The department did not assess a risk level or perform post-award monitoring for two subrecipients. • The department, after assessing a higher level of risk to one subrecipient, did not conduct increased monitoring. Department policy requires staff perform additional reviews of all the subrecipient’s quarterly reports when higher risk levels are assigned. In our second sample, we reviewed five of 15 vehicle purchases made during the audit period. We determined two contracts did not contain the 14 elements, which include award identification and requirements, the department is required to communicate to subrecipients. Repeat Finding: This is a repeat finding and was reported as a Single Audit finding 2021-004 in the audit for the two fiscal years ended June 30, 2021. Effect: Without efficient internal controls over compliance to ensure all elements of subrecipient monitoring are followed, the department is noncompliant with federal regulations. Additionally, noncompliance with subrecipient monitoring could result in undetected noncompliance on the part of the subrecipients and potentially unidentified questioned costs. Cause: Department staff identified turnover and the need for training as reasons for the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure subrecipient monitoring is completed following department policy and procedure and federal subrecipient monitoring requirements. B. Perform and document risk assessments for subrecipients. C. Perform enhanced monitoring in response to higher assessed subrecipient risk levels. D. Include required elements in subaward agreements for vehicle purchases. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-014: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.332, specifies the 14 required elements to communicate to subrecipients, the requirements for risk assessments, and monitoring during and after the award to ensure subrecipient compliance. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Montana Department of Transportation (department) did not ensure subrecipients of the Formula Grants for Rural Areas program funds were provided required information to identify their subaward or consistently assess and respond to risk levels for subrecipients, contrary to federal regulations. Previously reported internal control deficiencies continue to require improvement. Questioned Costs: No questioned costs identified. Context: The department provides operating and capital grant awards to subrecipients. The department’s 44 subrecipients include local government transit authorities, nonprofit organizations, and operators of public transportation or intercity bus services. As part of our audit, we conducted two samples to review various subrecipient monitoring requirements including award notification, risk assessment, and subrecipient reviews. Neither sample was statistically valid. In our sample of eight subrecipients that received federal funding during the audit period, we determined: • The department did not assess a risk level or perform post-award monitoring for two subrecipients. • The department, after assessing a higher level of risk to one subrecipient, did not conduct increased monitoring. Department policy requires staff perform additional reviews of all the subrecipient’s quarterly reports when higher risk levels are assigned. In our second sample, we reviewed five of 15 vehicle purchases made during the audit period. We determined two contracts did not contain the 14 elements, which include award identification and requirements, the department is required to communicate to subrecipients. Repeat Finding: This is a repeat finding and was reported as a Single Audit finding 2021-004 in the audit for the two fiscal years ended June 30, 2021. Effect: Without efficient internal controls over compliance to ensure all elements of subrecipient monitoring are followed, the department is noncompliant with federal regulations. Additionally, noncompliance with subrecipient monitoring could result in undetected noncompliance on the part of the subrecipients and potentially unidentified questioned costs. Cause: Department staff identified turnover and the need for training as reasons for the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure subrecipient monitoring is completed following department policy and procedure and federal subrecipient monitoring requirements. B. Perform and document risk assessments for subrecipients. C. Perform enhanced monitoring in response to higher assessed subrecipient risk levels. D. Include required elements in subaward agreements for vehicle purchases. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-014: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.332, specifies the 14 required elements to communicate to subrecipients, the requirements for risk assessments, and monitoring during and after the award to ensure subrecipient compliance. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Montana Department of Transportation (department) did not ensure subrecipients of the Formula Grants for Rural Areas program funds were provided required information to identify their subaward or consistently assess and respond to risk levels for subrecipients, contrary to federal regulations. Previously reported internal control deficiencies continue to require improvement. Questioned Costs: No questioned costs identified. Context: The department provides operating and capital grant awards to subrecipients. The department’s 44 subrecipients include local government transit authorities, nonprofit organizations, and operators of public transportation or intercity bus services. As part of our audit, we conducted two samples to review various subrecipient monitoring requirements including award notification, risk assessment, and subrecipient reviews. Neither sample was statistically valid. In our sample of eight subrecipients that received federal funding during the audit period, we determined: • The department did not assess a risk level or perform post-award monitoring for two subrecipients. • The department, after assessing a higher level of risk to one subrecipient, did not conduct increased monitoring. Department policy requires staff perform additional reviews of all the subrecipient’s quarterly reports when higher risk levels are assigned. In our second sample, we reviewed five of 15 vehicle purchases made during the audit period. We determined two contracts did not contain the 14 elements, which include award identification and requirements, the department is required to communicate to subrecipients. Repeat Finding: This is a repeat finding and was reported as a Single Audit finding 2021-004 in the audit for the two fiscal years ended June 30, 2021. Effect: Without efficient internal controls over compliance to ensure all elements of subrecipient monitoring are followed, the department is noncompliant with federal regulations. Additionally, noncompliance with subrecipient monitoring could result in undetected noncompliance on the part of the subrecipients and potentially unidentified questioned costs. Cause: Department staff identified turnover and the need for training as reasons for the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure subrecipient monitoring is completed following department policy and procedure and federal subrecipient monitoring requirements. B. Perform and document risk assessments for subrecipients. C. Perform enhanced monitoring in response to higher assessed subrecipient risk levels. D. Include required elements in subaward agreements for vehicle purchases. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-035: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A Criteria: Federal regulation, 2CFR 200.334, requires non-federal entities to retain records related to the federal awards for three years past the submission of the final expenditure report. Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) uses a spreadsheet to track monitoring reviews for subrecipients of the Title I program. The spreadsheet is designed to track both the schedule and the completion status of all monitoring reviews. The completion status for monitoring reviews scheduled to be performed in fiscal years 2022 and 2023 was not complete by August 2023, which is the month the spreadsheet was provided for audit. Internal controls were not adequate to ensure relevant columns were updated to demonstrate compliance with federal regulations. Further, the office could not demonstrate compliance with monitoring requirements because the documentation of the monitoring reviews, including the completion of a monitoring checklist, was incomplete. Questioned Costs: No questioned costs identified. Context: On average, the office plans to monitor about 29 Local Educational Agencies (LEAs) each year. Checklist forms are used to document monitoring and a spreadsheet is used to track the progress of multiple reviews. The spreadsheet used to track and document all Title I monitoring reviews was not complete and the office could not provide documentation all planned subrecipient monitoring reviews were complete. Of the 60 LEAs sampled, nine were missing a complete monitoring checklist. Therefore, there is no evidence demonstrating that all required monitoring reviews took place. The sample was not statistically valid. Effect: The office did not comply with federal regulations. Also, the risk the office will not detect noncompliance on the part of a subrecipient increases when planned subrecipient monitoring does not occur. Cause: Staff indicated that the upkeep of this spreadsheet was the responsibility of the Title I Administrative Assistant, a position vacant for nearly two years at the time of testing. The office switched the form used to document monitoring reviews. The new form documents exceptions rather than the entire review. Additionally, staff indicated files for two LEAs were missing due to a glitch with the network folder on which they were stored during a software update. Recommendation: We recommend the Office of Public Instruction: A. Improve internal controls by requiring and maintaining documentation related to the Title I subrecipient monitoring process. B. Conduct monitoring of subrecipient activities and retain documentation of monitoring reviews, as required by federal regulations. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-035: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A Criteria: Federal regulation, 2CFR 200.334, requires non-federal entities to retain records related to the federal awards for three years past the submission of the final expenditure report. Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) uses a spreadsheet to track monitoring reviews for subrecipients of the Title I program. The spreadsheet is designed to track both the schedule and the completion status of all monitoring reviews. The completion status for monitoring reviews scheduled to be performed in fiscal years 2022 and 2023 was not complete by August 2023, which is the month the spreadsheet was provided for audit. Internal controls were not adequate to ensure relevant columns were updated to demonstrate compliance with federal regulations. Further, the office could not demonstrate compliance with monitoring requirements because the documentation of the monitoring reviews, including the completion of a monitoring checklist, was incomplete. Questioned Costs: No questioned costs identified. Context: On average, the office plans to monitor about 29 Local Educational Agencies (LEAs) each year. Checklist forms are used to document monitoring and a spreadsheet is used to track the progress of multiple reviews. The spreadsheet used to track and document all Title I monitoring reviews was not complete and the office could not provide documentation all planned subrecipient monitoring reviews were complete. Of the 60 LEAs sampled, nine were missing a complete monitoring checklist. Therefore, there is no evidence demonstrating that all required monitoring reviews took place. The sample was not statistically valid. Effect: The office did not comply with federal regulations. Also, the risk the office will not detect noncompliance on the part of a subrecipient increases when planned subrecipient monitoring does not occur. Cause: Staff indicated that the upkeep of this spreadsheet was the responsibility of the Title I Administrative Assistant, a position vacant for nearly two years at the time of testing. The office switched the form used to document monitoring reviews. The new form documents exceptions rather than the entire review. Additionally, staff indicated files for two LEAs were missing due to a glitch with the network folder on which they were stored during a software update. Recommendation: We recommend the Office of Public Instruction: A. Improve internal controls by requiring and maintaining documentation related to the Title I subrecipient monitoring process. B. Conduct monitoring of subrecipient activities and retain documentation of monitoring reviews, as required by federal regulations. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "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." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Catalog Number: 21.027 Federal Agency: U.S. Department of Treasury Category of Finding: Subrecipient Monitoring Criteria: Pursuant to the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement May 2023, sections 3-M-1 and 3-M-2: "A pass-through entity (PTE) must: Monitor - Monitor the activites of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Condition: The City does not have a current written policy for subrecipient monitoring conforming to applicable Federal statutes per 2 CFR part 200, Appendix XI, Compliance Supplement May 2023, sections 3-M-1 and 3-M2. 1 of 3 invoices selected for testing did not have department head review and approval to ensure that subrecipient reimbursement request comply with the CSLFRF allowable costs. Cause: Lack of formal policies and procedures over federal requirement for subrecipient monitoring. Effect or Potential Effect: City may be sending funds to subrecipients for activities and services that are nonconforming to allowed costs under the Uniform Guidance. Questioned Cost: None Context: During the audit, we found one instance of subrecipient reimbursement that lacked evidence of review and approval. Statistical Sampling Validity: Non-statistical sampling was performed in relation to this finding. Repeat of a Prior-Year Finding: No Recommendation: We recommend the City establish an official written policy for subrecipient monitoring that is in line with the requirements of the Uniform Guidance. The policy should contain components for compliance with and references to Federal requirements, such as review of reports requested from the subrecipient regarding project status, reviewing invoices to ensure spending is limited to expenses involving approved projects, and proper approval procedures key personnel perform to ensure these invoices are valid. Management Response and Corrective Action Plan City's Response: The City concurs with the finding. Corrective Action Plan: The City will establish an official written policy for subrecipient monitoring that is in line with the requirements of the Uniform Guidance. Planned Implementation Date: December 2024 Responsible Person: Finance & Community Development Departments