Finding 2023-031: U.S. Department of Education ALN #84.425D and #84.425U, Education Stabilization Fund Grant #S425D200006, S010A200026-21A, S425U210006-21A Criteria: The Elementary and Secondary School Emergency Relief Fund (ESSER) is part of the Education Stabilization Fund. The ESSER reporting expectations for fiscal years 2022 and 2023 state that the annual reports provide the public with insight into how ESSER funds have been used, indicating it is important to report by expenditures category. In addition, in fiscal year 2023, the Office of Management & Budget Circular A-133 Compliance Supplement notes the following are ESSER annual report key line items: • Local Education Agency’s (LEA) expenditures by ESSER subgrant fund, expenditure category, and object code • Allocation of ESSER funds to schools and criteria used to allocate funds to schools, and • Full Time Equivalent (FTE) positions Federal regulation, 2 CFR 200.334, requires non-federal entities to retain records related to the federal awards. 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) did not accurately report all required elements of the ESSER annual reports submitted during fiscal years 2022 and 2023 contrary to federal requirements. In addition, although the office added some controls to the reporting process, like tying total expenditures reported to the state’s accounting system, they did not have sufficient controls in place to prevent, or detect and correct, material noncompliance related to ESSER annual reports submitted during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: The office submitted five spreadsheets each year for their ESSER annual reporting. We tested four spreadsheets each year, three focusing on ESSER I, ESSER II, and ESSER III. The fourth spreadsheet was called the Cross Act, which included total FTE employee information. All eight spreadsheets had inaccuracies as summarized below. • The office did not have the functionality to report ESSER I LEA's expenditures by category in their grants tracking system called E-Grants as required. Because the functionally was not available for ESSER I, all ESSER I expenditures were reported as "other items" for all reports submitted during the audit period. • The ESSER 2021 CARES report submitted to the federal government in July 2022 was not accurate when submitted, because the report did not include ESSER expenditures of $1.2 million spent by co-ops. The purpose of co-ops is for small to medium sized LEAs that pool resources in order to gain specialized services. The office is currently correcting these reports by adding the co-ops that were not included. • ESSER annual reporting requires expenditures to be reported by LEA, category, and type of expenditure. The reported information came from E-Grants, but the backup documentation was not retained to support the ESSER expenditures by category. This applies to ESSER I, II, and III reports provided to the federal government during the audit period. • We were not able to verify the accuracy of the key line items "allocation of ESSER funds to schools and the criteria used to allocate funds to schools" and "FTE". The LEAs reported this information and office personnel indicated there was no way to verify its accuracy. Office staff reported that LEA personnel do certify the data. These are key line items, indicating the federal government believes the items to be important. We also noted some FTEs that were likely inaccurate. For example, a youth correctional facility reported zero FTE. Repeat Finding: This is a repeat finding and was reported as Single Audit finding 2021-037 in the audit for the two fiscal years ended June 30, 2021. Effect: The office did not comply with federal reporting requirements for the ESSER program. As noted above, the federal government says the annual reports provide the public with insight into how ESSER funds have been used. This can’t be accomplished if the information in the report is unsupported. Cause: The office initially did not collect the level of expenditure detail needed to accurately complete the ESSER annual reports because guidance changed from the U. S. Department of Education after awarding ESSER I to the office. The office did not have the ability to amend the data collected in the E-Grants system, which resulted in reporting expenditure activities in the “other” categories. During the audit period, the office used E-Grants reports to compile expenditure data by category for ESSER II and III but did not retain documentation to support the reported data. Current staff members were unable to locate the supporting documents, because the person who ran and formatted the report was no longer with the office. The office can prevent this kind of knowledge loss by making sure multiple employees participate in the reporting process. Documenting internal controls related to the reporting process will also ensure compliance consistency, even when there is turnover. Recommendation: We recommend the Office of Public Instruction: A. Enhance internal controls to ensure annual reports are accurate and supported. B. Correct and resubmit previously submitted annual reports. C. Comply with federal regulations by reporting all required data elements in annual reports and retain support for the information reported. Views of Responsible Officials: The office concurs with this recommendation. For additional information regarding the office’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 2023-035: 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 2023-011: U.S. Department of Labor ALN #17.225, Unemployment Insurance Program (COVID-19) Grant #: • 23-A60UR000026 • UI-37990-22-60-A-30 • UI-34726-20-55-A-30 • UI-37075-21-55-A-30 • UI-37234-22-55-A-30 • UI-38784-22-55-A-30 • UI-38792-22-55-A-30 • UI-39333-23-55-A-30 Criteria: Federal guidance, ETA (Employment and Training Administration) 2112 Handbook, part B, requires the ETA 2112 report to reflect all money received, passed through, or paid out of the state unemployment fund. Federal guidance, ETA 2112 Handbook, part D, requires that the ETA 2112 report accurately show the net result of all transactions in the three accounts comprising the state unemployment fund. Federal guidance, ET Handbook No 336, section III(A)(2) requires that the UI-3 report data fairly and accurately represent the utilization of staff time and that data be traceable to supporting documentation. Federal regulation, 2 CFR 200.334, requires the retention of supporting documents relevant to a federal award for three years. 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 Labor and Industry (department) does not have sufficient internal controls in place related to the ETA 2112, ETA 2208A (UI-3), and ETA 9050 unemployment insurance program reports, resulting in reporting errors during the audit period. Questioned Costs: No questioned costs identified. Context: The department submits various unemployment insurance (UI) reports to the federal government. Some report financial information while others report performance metrics. We identified internal control deficiencies related to the preparation of three key reports: the ETA 2112 report, the UI-3 report, and the ETA 9050 report. • The ETA 2112 report summarizes state UI tax collections, benefits paid, and other transactions affecting the unemployment trust fund. We reviewed all 24 reports submitted during fiscal years 2022 and 2023 and found the 12 submitted in fiscal year 2023 reported incorrect or incomplete benefit account disbursement data. The total disbursements reported in the benefits account deviated from bank data by at least $387,548, with one month reporting $3,596,028 fewer disbursements than the bank data. The June 2023 report’s ending benefits account balance was 50 percent, or $6,577,256, higher than the bank’s account balance. • The ETA 2208A report, or UI-3, is a quarterly report that summarizes department staff hours worked and paid in relation to various UI program categories. This information is used by the federal government to help determine the level of funding awarded for administrative costs for the UI program. We completed a sample of the eight reports submitted during fiscal years 2022 and 2023. The sample was not statistically valid. We tested, and found issues with, four of the reports as outlined below: o Three reports included employee time allocations that were not approved by the appropriate UI program supervisor. o One report used allocations other than those that were approved by the appropriate supervisor. o One report did not include all the required employee hours. o One report used incorrect prior period data to calculate year-to-date amounts. In addition, while reviewing supporting information, we identified errors in a fifth report that was not part of our chosen sample. The report contained data that differed from the supported calculation and department staff could not explain where the reported values came from. • The ETA 9050 report outlines the time it takes the state to pay benefits to claimants for the first week of unemployment. The department’s benefit management system produces the data used to populate the report. Every state is required to validate the ETA 9050 data through a process prescribed by the U.S. Department of Labor. The department did not validate the data during fiscal years 2022 and 2023, but it has not done so for many years prior to this time, and it is on a corrective action plan with the federal government as a result. Effect: Due to internal control deficiencies, the department did not comply with federal reporting requirements during fiscal years 2022 and 2023 and reported, in some instances, materially inaccurate information. In addition, not complying with federal reporting requirements could result in reduced funding for the almost $10 million in administrative costs incurred related to the UI program or result in additional conditions imposed by the federal government. Cause: Based on discussions with department personnel, the following were identified as the cause of the issues for the various reports: • ETA 2112 report, the department’s internal control procedures did not include a reconciliation of reported account balances to the related bank statements. • ETA 2208A report, the department’s procedures did not include an appropriate level of review and approval given the complicated nature of the report. • ETA 9050 report, the validation process involved technical difficulties and the department lacked resources to address the issue. During the audit period, resources were directed at migrating to a new benefits management system where the validation issue will be addressed. However, the department did not have another control in place to verify the accuracy and completeness of the ETA 9050 report data in the interim. Recommendation: We recommend the Department of Labor and Industry: A. Improve internal controls over the preparation of key Unemployment Insurance program reports, and B. Report accurate and complete report data on key Unemployment Insurance program reports as required by federal rules and regulations. 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 2023-011: U.S. Department of Labor ALN #17.225, Unemployment Insurance Program (COVID-19) Grant #: • 23-A60UR000026 • UI-37990-22-60-A-30 • UI-34726-20-55-A-30 • UI-37075-21-55-A-30 • UI-37234-22-55-A-30 • UI-38784-22-55-A-30 • UI-38792-22-55-A-30 • UI-39333-23-55-A-30 Criteria: Federal guidance, ETA (Employment and Training Administration) 2112 Handbook, part B, requires the ETA 2112 report to reflect all money received, passed through, or paid out of the state unemployment fund. Federal guidance, ETA 2112 Handbook, part D, requires that the ETA 2112 report accurately show the net result of all transactions in the three accounts comprising the state unemployment fund. Federal guidance, ET Handbook No 336, section III(A)(2) requires that the UI-3 report data fairly and accurately represent the utilization of staff time and that data be traceable to supporting documentation. Federal regulation, 2 CFR 200.334, requires the retention of supporting documents relevant to a federal award for three years. 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 Labor and Industry (department) does not have sufficient internal controls in place related to the ETA 2112, ETA 2208A (UI-3), and ETA 9050 unemployment insurance program reports, resulting in reporting errors during the audit period. Questioned Costs: No questioned costs identified. Context: The department submits various unemployment insurance (UI) reports to the federal government. Some report financial information while others report performance metrics. We identified internal control deficiencies related to the preparation of three key reports: the ETA 2112 report, the UI-3 report, and the ETA 9050 report. • The ETA 2112 report summarizes state UI tax collections, benefits paid, and other transactions affecting the unemployment trust fund. We reviewed all 24 reports submitted during fiscal years 2022 and 2023 and found the 12 submitted in fiscal year 2023 reported incorrect or incomplete benefit account disbursement data. The total disbursements reported in the benefits account deviated from bank data by at least $387,548, with one month reporting $3,596,028 fewer disbursements than the bank data. The June 2023 report’s ending benefits account balance was 50 percent, or $6,577,256, higher than the bank’s account balance. • The ETA 2208A report, or UI-3, is a quarterly report that summarizes department staff hours worked and paid in relation to various UI program categories. This information is used by the federal government to help determine the level of funding awarded for administrative costs for the UI program. We completed a sample of the eight reports submitted during fiscal years 2022 and 2023. The sample was not statistically valid. We tested, and found issues with, four of the reports as outlined below: o Three reports included employee time allocations that were not approved by the appropriate UI program supervisor. o One report used allocations other than those that were approved by the appropriate supervisor. o One report did not include all the required employee hours. o One report used incorrect prior period data to calculate year-to-date amounts. In addition, while reviewing supporting information, we identified errors in a fifth report that was not part of our chosen sample. The report contained data that differed from the supported calculation and department staff could not explain where the reported values came from. • The ETA 9050 report outlines the time it takes the state to pay benefits to claimants for the first week of unemployment. The department’s benefit management system produces the data used to populate the report. Every state is required to validate the ETA 9050 data through a process prescribed by the U.S. Department of Labor. The department did not validate the data during fiscal years 2022 and 2023, but it has not done so for many years prior to this time, and it is on a corrective action plan with the federal government as a result. Effect: Due to internal control deficiencies, the department did not comply with federal reporting requirements during fiscal years 2022 and 2023 and reported, in some instances, materially inaccurate information. In addition, not complying with federal reporting requirements could result in reduced funding for the almost $10 million in administrative costs incurred related to the UI program or result in additional conditions imposed by the federal government. Cause: Based on discussions with department personnel, the following were identified as the cause of the issues for the various reports: • ETA 2112 report, the department’s internal control procedures did not include a reconciliation of reported account balances to the related bank statements. • ETA 2208A report, the department’s procedures did not include an appropriate level of review and approval given the complicated nature of the report. • ETA 9050 report, the validation process involved technical difficulties and the department lacked resources to address the issue. During the audit period, resources were directed at migrating to a new benefits management system where the validation issue will be addressed. However, the department did not have another control in place to verify the accuracy and completeness of the ETA 9050 report data in the interim. Recommendation: We recommend the Department of Labor and Industry: A. Improve internal controls over the preparation of key Unemployment Insurance program reports, and B. Report accurate and complete report data on key Unemployment Insurance program reports as required by federal rules and regulations. 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 2023-011: U.S. Department of Labor ALN #17.225, Unemployment Insurance Program (COVID-19) Grant #: • 23-A60UR000026 • UI-37990-22-60-A-30 • UI-34726-20-55-A-30 • UI-37075-21-55-A-30 • UI-37234-22-55-A-30 • UI-38784-22-55-A-30 • UI-38792-22-55-A-30 • UI-39333-23-55-A-30 Criteria: Federal guidance, ETA (Employment and Training Administration) 2112 Handbook, part B, requires the ETA 2112 report to reflect all money received, passed through, or paid out of the state unemployment fund. Federal guidance, ETA 2112 Handbook, part D, requires that the ETA 2112 report accurately show the net result of all transactions in the three accounts comprising the state unemployment fund. Federal guidance, ET Handbook No 336, section III(A)(2) requires that the UI-3 report data fairly and accurately represent the utilization of staff time and that data be traceable to supporting documentation. Federal regulation, 2 CFR 200.334, requires the retention of supporting documents relevant to a federal award for three years. 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 Labor and Industry (department) does not have sufficient internal controls in place related to the ETA 2112, ETA 2208A (UI-3), and ETA 9050 unemployment insurance program reports, resulting in reporting errors during the audit period. Questioned Costs: No questioned costs identified. Context: The department submits various unemployment insurance (UI) reports to the federal government. Some report financial information while others report performance metrics. We identified internal control deficiencies related to the preparation of three key reports: the ETA 2112 report, the UI-3 report, and the ETA 9050 report. • The ETA 2112 report summarizes state UI tax collections, benefits paid, and other transactions affecting the unemployment trust fund. We reviewed all 24 reports submitted during fiscal years 2022 and 2023 and found the 12 submitted in fiscal year 2023 reported incorrect or incomplete benefit account disbursement data. The total disbursements reported in the benefits account deviated from bank data by at least $387,548, with one month reporting $3,596,028 fewer disbursements than the bank data. The June 2023 report’s ending benefits account balance was 50 percent, or $6,577,256, higher than the bank’s account balance. • The ETA 2208A report, or UI-3, is a quarterly report that summarizes department staff hours worked and paid in relation to various UI program categories. This information is used by the federal government to help determine the level of funding awarded for administrative costs for the UI program. We completed a sample of the eight reports submitted during fiscal years 2022 and 2023. The sample was not statistically valid. We tested, and found issues with, four of the reports as outlined below: o Three reports included employee time allocations that were not approved by the appropriate UI program supervisor. o One report used allocations other than those that were approved by the appropriate supervisor. o One report did not include all the required employee hours. o One report used incorrect prior period data to calculate year-to-date amounts. In addition, while reviewing supporting information, we identified errors in a fifth report that was not part of our chosen sample. The report contained data that differed from the supported calculation and department staff could not explain where the reported values came from. • The ETA 9050 report outlines the time it takes the state to pay benefits to claimants for the first week of unemployment. The department’s benefit management system produces the data used to populate the report. Every state is required to validate the ETA 9050 data through a process prescribed by the U.S. Department of Labor. The department did not validate the data during fiscal years 2022 and 2023, but it has not done so for many years prior to this time, and it is on a corrective action plan with the federal government as a result. Effect: Due to internal control deficiencies, the department did not comply with federal reporting requirements during fiscal years 2022 and 2023 and reported, in some instances, materially inaccurate information. In addition, not complying with federal reporting requirements could result in reduced funding for the almost $10 million in administrative costs incurred related to the UI program or result in additional conditions imposed by the federal government. Cause: Based on discussions with department personnel, the following were identified as the cause of the issues for the various reports: • ETA 2112 report, the department’s internal control procedures did not include a reconciliation of reported account balances to the related bank statements. • ETA 2208A report, the department’s procedures did not include an appropriate level of review and approval given the complicated nature of the report. • ETA 9050 report, the validation process involved technical difficulties and the department lacked resources to address the issue. During the audit period, resources were directed at migrating to a new benefits management system where the validation issue will be addressed. However, the department did not have another control in place to verify the accuracy and completeness of the ETA 9050 report data in the interim. Recommendation: We recommend the Department of Labor and Industry: A. Improve internal controls over the preparation of key Unemployment Insurance program reports, and B. Report accurate and complete report data on key Unemployment Insurance program reports as required by federal rules and regulations. 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 2023-011: U.S. Department of Labor ALN #17.225, Unemployment Insurance Program (COVID-19) Grant #: • 23-A60UR000026 • UI-37990-22-60-A-30 • UI-34726-20-55-A-30 • UI-37075-21-55-A-30 • UI-37234-22-55-A-30 • UI-38784-22-55-A-30 • UI-38792-22-55-A-30 • UI-39333-23-55-A-30 Criteria: Federal guidance, ETA (Employment and Training Administration) 2112 Handbook, part B, requires the ETA 2112 report to reflect all money received, passed through, or paid out of the state unemployment fund. Federal guidance, ETA 2112 Handbook, part D, requires that the ETA 2112 report accurately show the net result of all transactions in the three accounts comprising the state unemployment fund. Federal guidance, ET Handbook No 336, section III(A)(2) requires that the UI-3 report data fairly and accurately represent the utilization of staff time and that data be traceable to supporting documentation. Federal regulation, 2 CFR 200.334, requires the retention of supporting documents relevant to a federal award for three years. 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 Labor and Industry (department) does not have sufficient internal controls in place related to the ETA 2112, ETA 2208A (UI-3), and ETA 9050 unemployment insurance program reports, resulting in reporting errors during the audit period. Questioned Costs: No questioned costs identified. Context: The department submits various unemployment insurance (UI) reports to the federal government. Some report financial information while others report performance metrics. We identified internal control deficiencies related to the preparation of three key reports: the ETA 2112 report, the UI-3 report, and the ETA 9050 report. • The ETA 2112 report summarizes state UI tax collections, benefits paid, and other transactions affecting the unemployment trust fund. We reviewed all 24 reports submitted during fiscal years 2022 and 2023 and found the 12 submitted in fiscal year 2023 reported incorrect or incomplete benefit account disbursement data. The total disbursements reported in the benefits account deviated from bank data by at least $387,548, with one month reporting $3,596,028 fewer disbursements than the bank data. The June 2023 report’s ending benefits account balance was 50 percent, or $6,577,256, higher than the bank’s account balance. • The ETA 2208A report, or UI-3, is a quarterly report that summarizes department staff hours worked and paid in relation to various UI program categories. This information is used by the federal government to help determine the level of funding awarded for administrative costs for the UI program. We completed a sample of the eight reports submitted during fiscal years 2022 and 2023. The sample was not statistically valid. We tested, and found issues with, four of the reports as outlined below: o Three reports included employee time allocations that were not approved by the appropriate UI program supervisor. o One report used allocations other than those that were approved by the appropriate supervisor. o One report did not include all the required employee hours. o One report used incorrect prior period data to calculate year-to-date amounts. In addition, while reviewing supporting information, we identified errors in a fifth report that was not part of our chosen sample. The report contained data that differed from the supported calculation and department staff could not explain where the reported values came from. • The ETA 9050 report outlines the time it takes the state to pay benefits to claimants for the first week of unemployment. The department’s benefit management system produces the data used to populate the report. Every state is required to validate the ETA 9050 data through a process prescribed by the U.S. Department of Labor. The department did not validate the data during fiscal years 2022 and 2023, but it has not done so for many years prior to this time, and it is on a corrective action plan with the federal government as a result. Effect: Due to internal control deficiencies, the department did not comply with federal reporting requirements during fiscal years 2022 and 2023 and reported, in some instances, materially inaccurate information. In addition, not complying with federal reporting requirements could result in reduced funding for the almost $10 million in administrative costs incurred related to the UI program or result in additional conditions imposed by the federal government. Cause: Based on discussions with department personnel, the following were identified as the cause of the issues for the various reports: • ETA 2112 report, the department’s internal control procedures did not include a reconciliation of reported account balances to the related bank statements. • ETA 2208A report, the department’s procedures did not include an appropriate level of review and approval given the complicated nature of the report. • ETA 9050 report, the validation process involved technical difficulties and the department lacked resources to address the issue. During the audit period, resources were directed at migrating to a new benefits management system where the validation issue will be addressed. However, the department did not have another control in place to verify the accuracy and completeness of the ETA 9050 report data in the interim. Recommendation: We recommend the Department of Labor and Industry: A. Improve internal controls over the preparation of key Unemployment Insurance program reports, and B. Report accurate and complete report data on key Unemployment Insurance program reports as required by federal rules and regulations. 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.
2023 – 005 – Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425 Pass-Through Agency: Arizona Department of Education Pass-Through Number(s): All Pass-Though Numbers Present in the SEFA Award Period: March 2020 through September 2024 Statistically Valid Sample: No, and not intended to be a Statistically Valid Sample. Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: In accordance with 2 CFR 200.334 Retention requirements for records, financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. Condition/Context: For one of the two samples selected the indirect cost was calculated incorrectly when compared to the supporting documentation. Questioned costs: None greater than the reportable amount. Cause: The District was not aware of the need to retain the original supporting documentation used for the indirect cost calculation. Effect: Failure to comply with 2 CFR 200 can lead to improper payment charged to the program. Repeat finding: No Recommendation: We recommend management to incorporate a management review control to ensure the calculation is complete and accurate and all supporting documents including the general ledger used for the calculation is retained in accordance with UG. Views of responsible officials: There is no disagreement with the audit finding. See corrective action plan.
2023 – 005 – Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425 Pass-Through Agency: Arizona Department of Education Pass-Through Number(s): All Pass-Though Numbers Present in the SEFA Award Period: March 2020 through September 2024 Statistically Valid Sample: No, and not intended to be a Statistically Valid Sample. Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: In accordance with 2 CFR 200.334 Retention requirements for records, financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. Condition/Context: For one of the two samples selected the indirect cost was calculated incorrectly when compared to the supporting documentation. Questioned costs: None greater than the reportable amount. Cause: The District was not aware of the need to retain the original supporting documentation used for the indirect cost calculation. Effect: Failure to comply with 2 CFR 200 can lead to improper payment charged to the program. Repeat finding: No Recommendation: We recommend management to incorporate a management review control to ensure the calculation is complete and accurate and all supporting documents including the general ledger used for the calculation is retained in accordance with UG. Views of responsible officials: There is no disagreement with the audit finding. See corrective action plan.
2023 – 005 – Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425 Pass-Through Agency: Arizona Department of Education Pass-Through Number(s): All Pass-Though Numbers Present in the SEFA Award Period: March 2020 through September 2024 Statistically Valid Sample: No, and not intended to be a Statistically Valid Sample. Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: In accordance with 2 CFR 200.334 Retention requirements for records, financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. Condition/Context: For one of the two samples selected the indirect cost was calculated incorrectly when compared to the supporting documentation. Questioned costs: None greater than the reportable amount. Cause: The District was not aware of the need to retain the original supporting documentation used for the indirect cost calculation. Effect: Failure to comply with 2 CFR 200 can lead to improper payment charged to the program. Repeat finding: No Recommendation: We recommend management to incorporate a management review control to ensure the calculation is complete and accurate and all supporting documents including the general ledger used for the calculation is retained in accordance with UG. Views of responsible officials: There is no disagreement with the audit finding. See corrective action plan.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced-price school meals pay the full price, set by the School Food Authority, for their meals. As a general rule, a child's eligibility for free or reduced-price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for generating and reviewing the direct certification report. The Food Service Director downloaded the direct certification report from the Indiana Department of Education in July and then bi-monthly thereafter in fiscal year 2022-2023. The July report was provided to the Information Technology (IT) department to upload into the School Corporation's software system; whereas the bi-monthly reports were sent to the IT with a list of students to be added. Students were not removed during the year. There was no review or approval process over the initial upload or any additional uploads of direct certifications completed by the IT. In addition, there was no review or approval of the direct certification data provided by the Food Service Director to the IT Department to ensure the student's information added during the year is complete and accurate. A sample of 40 students receiving free or reduced-priced lunches were selected for testing. Of the 40 students tested, the School Corporation could not provide documentation supporting the eligibility of the student for 10 students. Of the 30 remaining students, the School Corporation could not provide documentation that 1 student's benefits were calculated properly. Due to the lack of supporting documentation, we were unable to determine if student's receiving free and reduced-price meals were eligible to receive a free- or reduced-price meal. In addition, there was no documented internal control to ensure that the eligibility parameters entered into the School Corporation's computer software system were correct. Eligibility parameters were entered into the system by one employee without an oversight or review process to verify the information entered was accurate. The lack of internal controls and noncompliance was isolated to fiscal year 2022-2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 245.6(c)(4) states: "Calculating income. The local educational agency must use the income information provided by the household on the application to calculate the household's total current income. When a household submits an application containing complete documentation, as defined in § 245.2 and the household's total current income is at or below the eligibility limits specified in the Income Eligibility Guidelines as defined in § 245.2, the children in that household must be approved for free or reduced price benefits, as applicable." 7 CFR 245.6(e) states: "Recordkeeping. The local educational agency must maintain documentation substantiating eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain, except that if audit findings have not been resolved, the documentation must be maintained as long as required for resolution of the issues raised by the audit." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, student eligibility for free- or reduced-price meals could not be determined. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure student eligibility for free or reduced price meals is accurately determined and that all documentation is retained. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced-price school meals pay the full price, set by the School Food Authority, for their meals. As a general rule, a child's eligibility for free or reduced-price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for generating and reviewing the direct certification report. The Food Service Director downloaded the direct certification report from the Indiana Department of Education in July and then bi-monthly thereafter in fiscal year 2022-2023. The July report was provided to the Information Technology (IT) department to upload into the School Corporation's software system; whereas the bi-monthly reports were sent to the IT with a list of students to be added. Students were not removed during the year. There was no review or approval process over the initial upload or any additional uploads of direct certifications completed by the IT. In addition, there was no review or approval of the direct certification data provided by the Food Service Director to the IT Department to ensure the student's information added during the year is complete and accurate. A sample of 40 students receiving free or reduced-priced lunches were selected for testing. Of the 40 students tested, the School Corporation could not provide documentation supporting the eligibility of the student for 10 students. Of the 30 remaining students, the School Corporation could not provide documentation that 1 student's benefits were calculated properly. Due to the lack of supporting documentation, we were unable to determine if student's receiving free and reduced-price meals were eligible to receive a free- or reduced-price meal. In addition, there was no documented internal control to ensure that the eligibility parameters entered into the School Corporation's computer software system were correct. Eligibility parameters were entered into the system by one employee without an oversight or review process to verify the information entered was accurate. The lack of internal controls and noncompliance was isolated to fiscal year 2022-2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 245.6(c)(4) states: "Calculating income. The local educational agency must use the income information provided by the household on the application to calculate the household's total current income. When a household submits an application containing complete documentation, as defined in § 245.2 and the household's total current income is at or below the eligibility limits specified in the Income Eligibility Guidelines as defined in § 245.2, the children in that household must be approved for free or reduced price benefits, as applicable." 7 CFR 245.6(e) states: "Recordkeeping. The local educational agency must maintain documentation substantiating eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain, except that if audit findings have not been resolved, the documentation must be maintained as long as required for resolution of the issues raised by the audit." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, student eligibility for free- or reduced-price meals could not be determined. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure student eligibility for free or reduced price meals is accurately determined and that all documentation is retained. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Assistance Listings number and name: 14.267 Continuum of Care Program Award number and year: AZ9999U9T002101, February 1, 2022 through June 30, 2023 Federal agency: U.S. Department of Housing and Urban Development Compliance requirement: Procurement Questioned costs: Unknown Condition—Contrary to federal regulations, the Department’s policies and procedures did not include provisions required by the federal regulations, and the Department did not retain documentation to support procurement actions for 2 vendors we tested. Specifically, the Department’s policies and procedures did not require procurement transactions to be documented or conducted in a manner providing full and open competition. Further, the Department did not include items required by federal regulations such as contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; procurement of recovered materials; and required federal contract provisions. Further, the Department paid the 2 vendors we tested $257,165 for administrative support services during fiscal year 2023 without retaining procurement action documentation such as requests for proposals, contracts, or other documents demonstrating the Department’s compliance with federal procurement requirements. Effect—The Department’s policies and procedures not complying with federal regulations and not maintaining documentation of its procurement actions increased the Department’s risk of not: • Receiving the most advantageous prices for the goods and services purchased with federal monies. • Considering eligible small and minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms as potential vendors. • Giving preference to procure goods, products, and materials produced in the United States. • Considering purchasing products or services that can be reused, refurbished, or recycled. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department did not establish and maintain effective internal control over the program’s procurement requirements that provided reasonable assurance that it was managing the program’s awards in compliance with federal regulations. Department management reported that because the Department does not have to comply with State procurement requirements, they did not think about and consider federal regulations when developing written procurement policies and procedures and procuring program services for federal awards.1 Further, Department management reported they have no record of when the Department awarded the administrative service contracts because the contracts are at least 15 years old, and the records are either not accessible in storage or were destroyed. Criteria—Federal regulations require the Department to follow the same policies and procedures it uses for nonfederal procurements and to retain all records related to a federal program, including procurement action documentation, for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §§ 200.317 and 200.334). Federal regulations also require the Department to comply with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials; and ensure that every purchase order or contract includes required federal contract provisions (2 CFR §§200.321, 200.322, 200.323, and 200.327). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Department should: 1. Establish and maintain effective internal control over the program’s procurement requirements by updating its written policies and procedures to: a. Retain procurement action documentation for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency. b. Require full and open competition using requests for competitively bid proposals. Alternatively, document each sole source procurement only after conducting a good-faith search for available sources and concluding there is only a single source and include it in the contract file. c. Document compliance with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials. d. Ensure that every purchase order or contract includes required federal contract provisions. 2. Retain procurement action documentation when procuring property and services using federal funds in accordance with federal records retention requirements, ensuring compliance with federal procurement requirements. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Department is exempt from following the State’s procurement code (Arizona Revised Statutes §41-3953[D]).
Assistance Listings number and name: 14.267 Continuum of Care Program Award number and year: AZ9999U9T002101, February 1, 2022 through June 30, 2023 Federal agency: U.S. Department of Housing and Urban Development Compliance requirement: Procurement Questioned costs: Unknown Condition—Contrary to federal regulations, the Department’s policies and procedures did not include provisions required by the federal regulations, and the Department did not retain documentation to support procurement actions for 2 vendors we tested. Specifically, the Department’s policies and procedures did not require procurement transactions to be documented or conducted in a manner providing full and open competition. Further, the Department did not include items required by federal regulations such as contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; procurement of recovered materials; and required federal contract provisions. Further, the Department paid the 2 vendors we tested $257,165 for administrative support services during fiscal year 2023 without retaining procurement action documentation such as requests for proposals, contracts, or other documents demonstrating the Department’s compliance with federal procurement requirements. Effect—The Department’s policies and procedures not complying with federal regulations and not maintaining documentation of its procurement actions increased the Department’s risk of not: • Receiving the most advantageous prices for the goods and services purchased with federal monies. • Considering eligible small and minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms as potential vendors. • Giving preference to procure goods, products, and materials produced in the United States. • Considering purchasing products or services that can be reused, refurbished, or recycled. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department did not establish and maintain effective internal control over the program’s procurement requirements that provided reasonable assurance that it was managing the program’s awards in compliance with federal regulations. Department management reported that because the Department does not have to comply with State procurement requirements, they did not think about and consider federal regulations when developing written procurement policies and procedures and procuring program services for federal awards.1 Further, Department management reported they have no record of when the Department awarded the administrative service contracts because the contracts are at least 15 years old, and the records are either not accessible in storage or were destroyed. Criteria—Federal regulations require the Department to follow the same policies and procedures it uses for nonfederal procurements and to retain all records related to a federal program, including procurement action documentation, for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §§ 200.317 and 200.334). Federal regulations also require the Department to comply with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials; and ensure that every purchase order or contract includes required federal contract provisions (2 CFR §§200.321, 200.322, 200.323, and 200.327). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Department should: 1. Establish and maintain effective internal control over the program’s procurement requirements by updating its written policies and procedures to: a. Retain procurement action documentation for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency. b. Require full and open competition using requests for competitively bid proposals. Alternatively, document each sole source procurement only after conducting a good-faith search for available sources and concluding there is only a single source and include it in the contract file. c. Document compliance with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials. d. Ensure that every purchase order or contract includes required federal contract provisions. 2. Retain procurement action documentation when procuring property and services using federal funds in accordance with federal records retention requirements, ensuring compliance with federal procurement requirements. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Department is exempt from following the State’s procurement code (Arizona Revised Statutes §41-3953[D]).
Assistance Listings number and name: 17.225 Unemployment Insurance Award number and year: None Federal agency: U.S. Department of Labor Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not retain documentation to support information it reported to the federal agency for its Unemployment Insurance (UI) federal program during fiscal year 2023. Specifically, for all 12 monthly 9050 – Time Lapse of All First Payments except Workshare reports, DES did not retain supporting documentation, like system reports, queries, or screenshots, for the key line item we tested, which consisted of the following data elements: • First payment time lapse 14/21 days. • Interstate and intrastate UI. • Unemployment compensation for federal employees (UCFE). • Unemployment compensation for ex-service members (UCX). • Full and partial weeks. Effect—DES’ failure to retain supporting documentation results in the federal agency being unable to rely on the reports to effectively monitor DES’s program administration, including its compliance with program requirements and the timeliness of benefits paid, and evaluate the program’s success. Cause—DES had not developed written policies and procedures to require employees to prepare and retain supporting documentation to support the program information it reports to the federal agency for the UI program. Further, the DES staff member responsible for compiling the reports reported to us that not retaining the documentation was an oversight, and she thought the supporting documentation was being retained. Criteria—Federal regulation and the UI Handbook require DES to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of 3 years from the date of submission of the final report (2 CFR §200.334).1 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendation—DES should develop and implement written policies and procedures to ensure it prepares and retains detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for the UI program. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The UI Handbook outlines the criteria for compiling the 9050 – Time Lapse of All First Payments except Workshare report, including requirements to retain source data supporting reported information for at least 3 years (U.S. Department of the Labor. [2017]. “Section V: Benefits Time Lapse and Quality.” and “Section L: Record Retention.” Unemployment Insurance 401 Handbook, 5th ed., retrieved 7/22/24 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2017/ETHand401_5th.pdf)
Assistance Listings number and name: 17.225 Unemployment Insurance Award number and year: None Federal agency: U.S. Department of Labor Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not retain documentation to support information it reported to the federal agency for its Unemployment Insurance (UI) federal program during fiscal year 2023. Specifically, for all 12 monthly 9050 – Time Lapse of All First Payments except Workshare reports, DES did not retain supporting documentation, like system reports, queries, or screenshots, for the key line item we tested, which consisted of the following data elements: • First payment time lapse 14/21 days. • Interstate and intrastate UI. • Unemployment compensation for federal employees (UCFE). • Unemployment compensation for ex-service members (UCX). • Full and partial weeks. Effect—DES’ failure to retain supporting documentation results in the federal agency being unable to rely on the reports to effectively monitor DES’s program administration, including its compliance with program requirements and the timeliness of benefits paid, and evaluate the program’s success. Cause—DES had not developed written policies and procedures to require employees to prepare and retain supporting documentation to support the program information it reports to the federal agency for the UI program. Further, the DES staff member responsible for compiling the reports reported to us that not retaining the documentation was an oversight, and she thought the supporting documentation was being retained. Criteria—Federal regulation and the UI Handbook require DES to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of 3 years from the date of submission of the final report (2 CFR §200.334).1 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendation—DES should develop and implement written policies and procedures to ensure it prepares and retains detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for the UI program. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The UI Handbook outlines the criteria for compiling the 9050 – Time Lapse of All First Payments except Workshare report, including requirements to retain source data supporting reported information for at least 3 years (U.S. Department of the Labor. [2017]. “Section V: Benefits Time Lapse and Quality.” and “Section L: Record Retention.” Unemployment Insurance 401 Handbook, 5th ed., retrieved 7/22/24 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2017/ETHand401_5th.pdf)
Assistance Listings number and name: 17.225 Unemployment Insurance Award number and year: None Federal agency: U.S. Department of Labor Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not retain documentation to support information it reported to the federal agency for its Unemployment Insurance (UI) federal program during fiscal year 2023. Specifically, for all 12 monthly 9050 – Time Lapse of All First Payments except Workshare reports, DES did not retain supporting documentation, like system reports, queries, or screenshots, for the key line item we tested, which consisted of the following data elements: • First payment time lapse 14/21 days. • Interstate and intrastate UI. • Unemployment compensation for federal employees (UCFE). • Unemployment compensation for ex-service members (UCX). • Full and partial weeks. Effect—DES’ failure to retain supporting documentation results in the federal agency being unable to rely on the reports to effectively monitor DES’s program administration, including its compliance with program requirements and the timeliness of benefits paid, and evaluate the program’s success. Cause—DES had not developed written policies and procedures to require employees to prepare and retain supporting documentation to support the program information it reports to the federal agency for the UI program. Further, the DES staff member responsible for compiling the reports reported to us that not retaining the documentation was an oversight, and she thought the supporting documentation was being retained. Criteria—Federal regulation and the UI Handbook require DES to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of 3 years from the date of submission of the final report (2 CFR §200.334).1 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendation—DES should develop and implement written policies and procedures to ensure it prepares and retains detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for the UI program. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The UI Handbook outlines the criteria for compiling the 9050 – Time Lapse of All First Payments except Workshare report, including requirements to retain source data supporting reported information for at least 3 years (U.S. Department of the Labor. [2017]. “Section V: Benefits Time Lapse and Quality.” and “Section L: Record Retention.” Unemployment Insurance 401 Handbook, 5th ed., retrieved 7/22/24 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2017/ETHand401_5th.pdf)
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Inadequate Controls Over Expenditures Federal Program Name and Year: McKinney Education for Homeless Children Project Number: 2022-4920-RF and 2023-4920-RF Assistance Listing No.: 84.196 Passed Through: Illinois State Board of Education Federal Agency: U.S. Department of Education Criteria/Specific Requirements The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) require that the Regional Office follow the standards set forth at 2 CFR 200.334 that requires “Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” The Uniform Guidance section 200.303 Internal Controls states the following: “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.” In addition, Regional Office of Education #56 practices require the stamping of invoices as “paid” when processed in order to avoid duplicate payments. Condition During our testing of a sample of 40 expenditures of McKinney Education for Homeless Children grant funds by the Regional Office of Education #56, we noted that six expenditures totaling $52,005 did not have any supporting documentation. In addition, for those expenditures with supporting documentation, none of the invoices were stamped “paid”. During our testing of an additional sample of 40 expenditure transactions of the Regional Office of Education #56 for purposes of testing controls over financial reporting, we noted the following: • No documentation was available for four expenditures • No supporting invoices, but only purchase orders, were available for three expenditures • One invoice was not stamped “paid”. Questioned Costs $52,005 Context The Regional Office of Education expended a total of $1,187,011 of federal awards in fiscal year 2023. Of the total number of transactions tested (both grant and non-grant), 12.5% lacked any type of documentation. The greater percentage of total exceptions related to grant expenditures. Effect Inadequate controls over expenditures increase the risk of unauthorized or inappropriate spending as well as duplicate payment of invoices. A lack of supporting documentation for expenditures also results in questioned costs. Cause Regional Office of Education #56 management indicated that they have gone through many personnel changes recently and the new personnel had some difficulty finding files from when their predecessors were employed. Also, the “paid” stamp should have been used but was not used by everyone. Recommendation We recommend the Regional Office of Education #56 establish procedures to ensure that documentation supporting expenditures of federal awards is maintained in accordance with the Uniform Guidance. In addition, we recommend that the Regional Office of Education #56’s practice of cancelling invoices upon payment be consistently followed. Management Response We agree with the finding. Expenditures of federal funds will be more closely monitored, more adequately supported, and paid invoices will be marked as paid. Uniform Guidance will be more closely followed.
Criteria: The Organization is required to establish and maintain effective internal controls over financial documentation to ensure compliance with federal regulations, as outlined in 2 CFR 200.303 and 2 CFR 200.334 of the Uniform Guidance. These controls are crucial for the accurate management and reporting of federal funds. Statement of Condition: During our audit, we found that eight out of 60 expenditures tested had incomplete documentation of the organization’s approval process in accordance with its internal controls. Additionally, one check stub could not be located. Cause: The existing internal control processes related to the organization and retrieval of financial documentation appear to be insufficient, a situation that was exacerbated by staffing shortages during the period under audit. Addressing these challenges through enhanced processes and adequate staffing could improve the Organization's ability to provide timely and complete documentation. Effect or Potential Effect: The inability to produce essential financial documentation may lead to compliance challenges with federal funding requirements. Additionally, this increases the risk of questioned costs, which could have financial implications for the Organization if not rectified. Recommendation: It is recommended that the Organization implement enhanced procedures for the systematic maintenance and retrieval of all financial records related to expenditures. This should include staff training on these protocols to ensure compliance and improve overall internal controls. Management’s Response: Management agrees with this finding. Please refer to the Corrective Action Plan for further details.
Block Grants for Prevention and Treatment of Substance Abuse ALN No. 93.959 U.S. Department of Health and Human Services Opioid STR ALN No. 93.788 U.S. Department of Health and Human Services Criteria or Specific Requirement – Activities Allowed and Unallowed and Cost Principles – 2 CFR Part 200, Subpart E, and Period of Performance – 2 CFR sections 200.308, 200.309, and 200.403(h) Condition – A sample of 80 expenditures were selected from each of the following populations: • ALN No. 93.959 – 1,631 items totaling $1,399,666 • ALN No. 93.788 – 1,728 items totaling $2,664,710 The samples were not, and are not intended to be, statistically valid. Of the 80 expenditures tested from each grant program, the following were determined to lack appropriate supporting documentation to support being charged to grant program: • ALN No. 93.959 - 47 items totaling $48,756, including projected errors over the total population totaling $582,093 • ALN No. 93.788 - 7 items totaling $30,061, including projected errors over the total population totaling $138,133 The Organization did not have adequate supporting documentation demonstrating actual time and effort reporting and lacked evidence of supporting invoices. Cause – The Organization charged budgeted percentages to the grant programs without a system in place to monitor and track that actual time and effort was consistent with budgeted percentages. In addition, the Organization charged expenditures to the grant programs without evidence of supporting invoices. Effect or potential effect – Costs charged to the grant programs could have varied from actual time and effort. In addition, costs charged to the grant could not be supported by actual invoices. Questioned costs – • ALN No. 93.959 - $48,756 • ALN No. 93.788 - $30,061 Context – The Organization did not have a reasonable methodology of allocating costs to these grant programs and did not maintain proper supporting invoices. Identification as a repeat finding, if applicable – Repeat finding (2022-003). Recommendation – Management should implement policies and procedures that strengthen internal control over compliance in relation to activities allowed and cost principles. The policy and procedure should be designed to ensure that a reasonable allocation methodology is implemented and followed or that time and effort is certified by the employee on a regular basis. In addition, management should implement a document retention policy consistent with 2 CFR 200.334.
Block Grants for Prevention and Treatment of Substance Abuse ALN No. 93.959 U.S. Department of Health and Human Services Opioid STR ALN No. 93.788 U.S. Department of Health and Human Services Criteria or Specific Requirement – Activities Allowed and Unallowed and Cost Principles – 2 CFR Part 200, Subpart E, and Period of Performance – 2 CFR sections 200.308, 200.309, and 200.403(h) Condition – A sample of 80 expenditures were selected from each of the following populations: • ALN No. 93.959 – 1,631 items totaling $1,399,666 • ALN No. 93.788 – 1,728 items totaling $2,664,710 The samples were not, and are not intended to be, statistically valid. Of the 80 expenditures tested from each grant program, the following were determined to lack appropriate supporting documentation to support being charged to grant program: • ALN No. 93.959 - 47 items totaling $48,756, including projected errors over the total population totaling $582,093 • ALN No. 93.788 - 7 items totaling $30,061, including projected errors over the total population totaling $138,133 The Organization did not have adequate supporting documentation demonstrating actual time and effort reporting and lacked evidence of supporting invoices. Cause – The Organization charged budgeted percentages to the grant programs without a system in place to monitor and track that actual time and effort was consistent with budgeted percentages. In addition, the Organization charged expenditures to the grant programs without evidence of supporting invoices. Effect or potential effect – Costs charged to the grant programs could have varied from actual time and effort. In addition, costs charged to the grant could not be supported by actual invoices. Questioned costs – • ALN No. 93.959 - $48,756 • ALN No. 93.788 - $30,061 Context – The Organization did not have a reasonable methodology of allocating costs to these grant programs and did not maintain proper supporting invoices. Identification as a repeat finding, if applicable – Repeat finding (2022-003). Recommendation – Management should implement policies and procedures that strengthen internal control over compliance in relation to activities allowed and cost principles. The policy and procedure should be designed to ensure that a reasonable allocation methodology is implemented and followed or that time and effort is certified by the employee on a regular basis. In addition, management should implement a document retention policy consistent with 2 CFR 200.334.
FINDING REFERENCE NUMBER 2023-029 (See Finding Reference Number 2023-001) FEDERAL PROGRAM (ALN – 10.542) PANDEMIC EBT FOOD BENEFITS (P-EBT) U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR456S9032; 2301PR456S9032 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our internal control procedures for the financial management system, allowable activities and reporting requirements, we found the following deficiencies: • Of ten (10) expenditure accounting transactions, three (3) were selected for documentation review. It was found that a transaction posted in August 2022 for $193,642,697.32 included $54,195,406.92, corresponding to benefit payrolls for May 2022, which had previously been claimed in June 2022. They subsequently adjusted the expenditure reported for this amount. • All expenditure transactions are coded under the ID number PANDEMICEBT-B22; although, in the SF-778 report for the quarter ended June 30, 2023, for the grant award period for 2023, expenditures in the amount of $29,606,939 were reported as incurred. This data does not agree with the accounting information of PRIFAS. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. After conducting several interviews, we were able to identify the staff responsible for validating the benefit payrolls. This person told us these benefit payrolls were processed via email, which indicated that the information submitted was preliminary. However, the finance staff proceeded with the adjustment in the accounting system. We conducted interviews to determine if anything had been modified in the benefit payroll processing process. To prevent this situation from happening again, they told us it wasn't necessary because it hasn't happened again. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE ADSEF has not established an adequate control procedure to identify duplicate claims before they are filed and recorded. During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF-425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT The failure to have an internal control procedure that identifies standard documentation or forms, personnel responsible for validating the information included, and controls payroll and benefit expenses and other previously claimed expenses allowed for the recognition and claim of an expense incurred twice. ADSEF is not ensuring that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statements. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that identifies documentation, personnel responsible, authorizations, and validations that can prevent this situation from recurring. In addition, we recommend management to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-033 (See Finding Reference Number 2023-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G990229 (TANF – COVID-19) (Federal Award Year: 2021) 2022G996117; 2023996117 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” In addition, 45 CFR 260.31 (b)(1), defines what non-recurrent, short-term (NRST) benefits are. In relation to Pandemic Emergency Assistance Fund (PEAF), the regulation establishes that: “NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training.” STATEMENT OF CONDITION As part of our audit procedures over transactions related to emissions of benefits for the TANF program, we selected five (5) transactions, from a population of fifty-three (53) emissions made during the fiscal year. We noted the following deficiencies: i. An emission of benefits for $16,236,447.24 related to PEAF funding was made. We request evidence of an established manual or guide that defines or identifies the need that would be addressed with the issuance of these funds, and the subsequent monitoring of the usage. ii. An emission of benefits for $3,633,800 was made related to a bonus. The documentation for this issuance includes an authorization letter establishing a benefit of $800 per child between the ages of 5 and 17 years and 11 months, serving a population of 4,492 participants, for a total of $3,593,600. Later, another authorization letter added $37,000 but did not specify the number of children included in this amendment. The sum of both authorizations is $3,630,600; however, the amount reflected in PRIFAS is $3,633,800. According to the EBT document related to this issuance, the amount issued was $3,596,800 and indicates that the number of participants benefited was 4,974, giving an average benefit of $723.12. In this EBT document, beneficiaries are distributed by region; however, there are 5 beneficiaries who are not assigned to a region, for a total of $4,000. iii. An emission of $1,988,000 was made related to an incentive for some beneficiaries. In accordance with an authorization letter, the benefit included $3,500 per participants who worked or participated in an activity leading to employment for 3 months or more. In accordance with the State Plan, active recipients may receive a 6-months period Work Incentive Bonus payment. Per the authorization letter the benefit of $3,500 was issued to 522 participants, for a total of $1,827,000; another authorization letter increased $3,500 in funds. This amount does not agree with the PRIFAS amount of $1,988,000. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect costs claims. The TANF program reported four (4) transactions related to indirect costs, and for the Nutrition Assistance for Puerto Rico five (5) transactions were reported. We requested evidence of two (2) transactions for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. There are no processes to reconcile PRIFAS information with emissions reported in EBT, nor to claim indirect costs. STATEMENT OF CAUSE ADSEF does not have a process for validating EBT issuances with PRIFAS, and this reconciliation is not performed periodically to detect any errors or missing information when accounting for transactions. POSSIBLE ASSERTED EFFECT The PRIFAS accounting system is not reconciled with EBT reports. This process is not stipulated as part of the internal controls required to ensure that the records used to prepare the financial statement, SEFA, and Federal reports are reconciled, and any discrepancies are identified. In addition, indirect costs calculation may include unallowable costs and not be detected timely. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.
FINDING REFERENCE NUMBER 2023-033 (See Finding Reference Number 2023-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G990229 (TANF – COVID-19) (Federal Award Year: 2021) 2022G996117; 2023996117 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” In addition, 45 CFR 260.31 (b)(1), defines what non-recurrent, short-term (NRST) benefits are. In relation to Pandemic Emergency Assistance Fund (PEAF), the regulation establishes that: “NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training.” STATEMENT OF CONDITION As part of our audit procedures over transactions related to emissions of benefits for the TANF program, we selected five (5) transactions, from a population of fifty-three (53) emissions made during the fiscal year. We noted the following deficiencies: i. An emission of benefits for $16,236,447.24 related to PEAF funding was made. We request evidence of an established manual or guide that defines or identifies the need that would be addressed with the issuance of these funds, and the subsequent monitoring of the usage. ii. An emission of benefits for $3,633,800 was made related to a bonus. The documentation for this issuance includes an authorization letter establishing a benefit of $800 per child between the ages of 5 and 17 years and 11 months, serving a population of 4,492 participants, for a total of $3,593,600. Later, another authorization letter added $37,000 but did not specify the number of children included in this amendment. The sum of both authorizations is $3,630,600; however, the amount reflected in PRIFAS is $3,633,800. According to the EBT document related to this issuance, the amount issued was $3,596,800 and indicates that the number of participants benefited was 4,974, giving an average benefit of $723.12. In this EBT document, beneficiaries are distributed by region; however, there are 5 beneficiaries who are not assigned to a region, for a total of $4,000. iii. An emission of $1,988,000 was made related to an incentive for some beneficiaries. In accordance with an authorization letter, the benefit included $3,500 per participants who worked or participated in an activity leading to employment for 3 months or more. In accordance with the State Plan, active recipients may receive a 6-months period Work Incentive Bonus payment. Per the authorization letter the benefit of $3,500 was issued to 522 participants, for a total of $1,827,000; another authorization letter increased $3,500 in funds. This amount does not agree with the PRIFAS amount of $1,988,000. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect costs claims. The TANF program reported four (4) transactions related to indirect costs, and for the Nutrition Assistance for Puerto Rico five (5) transactions were reported. We requested evidence of two (2) transactions for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. There are no processes to reconcile PRIFAS information with emissions reported in EBT, nor to claim indirect costs. STATEMENT OF CAUSE ADSEF does not have a process for validating EBT issuances with PRIFAS, and this reconciliation is not performed periodically to detect any errors or missing information when accounting for transactions. POSSIBLE ASSERTED EFFECT The PRIFAS accounting system is not reconciled with EBT reports. This process is not stipulated as part of the internal controls required to ensure that the records used to prepare the financial statement, SEFA, and Federal reports are reconciled, and any discrepancies are identified. In addition, indirect costs calculation may include unallowable costs and not be detected timely. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.
FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2023-040 (See Finding Reference Number 2023-012) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE (ALN – 93.568) COVID-19 – LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA; 2201PRLIEA; 2301PRLIEA; 2001PRLIEA; 2001PRE5C3 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 27,038 who were eligible for the crisis subsidy program. Of the sample of participants, only eight (8) files were submitted to us for evaluation. This represents a scope limitation. In relation to the requirement of Performance Reporting and Special reporting, we requested the applicable reports submitted during the fiscal year 2022-2023, the reports submitted for our review were applicable for the fiscal year 2023-2024. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with these compliance requirements. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. In addition, ADSEF does not have adequate controls and safeguards over the reports submitted to the Federal government. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with the eligibility and reporting requirements because the information in the files and applicable reports was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time. In addition, improve its system for filing reports submitted to the Federal government.
FINDING REFERENCE NUMBER 2023-040 (See Finding Reference Number 2023-012) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE (ALN – 93.568) COVID-19 – LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA; 2201PRLIEA; 2301PRLIEA; 2001PRLIEA; 2001PRE5C3 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 27,038 who were eligible for the crisis subsidy program. Of the sample of participants, only eight (8) files were submitted to us for evaluation. This represents a scope limitation. In relation to the requirement of Performance Reporting and Special reporting, we requested the applicable reports submitted during the fiscal year 2022-2023, the reports submitted for our review were applicable for the fiscal year 2023-2024. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with these compliance requirements. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. In addition, ADSEF does not have adequate controls and safeguards over the reports submitted to the Federal government. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with the eligibility and reporting requirements because the information in the files and applicable reports was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time. In addition, improve its system for filing reports submitted to the Federal government.
FINDING REFERENCE NUMBER 2023-049 (See Finding Reference Number 2023-020) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 211PR476V1003/4 – ARPA (Federal Award Years: March 11, 2021 through September 30, 2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that (a) each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b), the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected two reports that closed during our fiscal year audit. With respect with the Grant Award 221PR426S7003 and 221PR426S7004 we noted the following deficiency: • The auditee was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. • In addition, for all the Federal awards mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported.
FINDING REFERENCE NUMBER 2023-051 (See Finding Reference Number 2023-021) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that: (a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.) (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for LIHEAP program, we selected two reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, for the amount of encumbrances of $11,032,784.51, the amount of $9,943,769.52 was not supported by a detail. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.
FINDING REFERENCE NUMBER 2023-052 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with 45 CFR, Subtitle B, Chapter II, Part 265.7, states that: (a) Each State's quarterly reports [the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), the SSP-MOE Data Report, and the Work Outcomes of TANF Exciters Report] must be complete and accurate and filed by the due date. (b) For a disaggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems, and includes correction of the quarterly data by the end of the fiscal year reporting period; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data for all required elements (i.e., no data is missing); (4) (i) The State provides data on all families; or (ii) If the State opts to use sampling, the State reports data on all families selected in a sample that meets the specification and procedures in the TANF Sampling Manual (except for families listed in error); and (5) Where estimates are necessary (e.g., some types of assistance may require cost estimates), the State uses reasonable methods to develop these estimates. (c) For an aggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data on all applicable elements; and (4) Monthly totals are unduplicated counts for all families (e.g., the number of families and the number of out-of-wedlock births are unduplicated counts). In addition, 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b) the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our procedures for understanding internal controls for the preparation of ACF-199 reports, we request a procedures manual on how these reports are processed and the personnel responsible for each process. ADSEF did not provide us with a manual describing the data collection process, how the information provided by the regions is validated, and the individuals responsible for submitting the reports. To evaluate compliance with the reported data, the quarter ending June 2023 was selected. From this period, forty (40) participants were selected. ADSEF was required to provide us with the corresponding participant worksheet appendix and the physical file to corroborate the information included in the report. ADSEF provided us with evidence of the hand-completed forms; however, we were not provided with the physical files to validate the information included in each document. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. After sample selection, ADSEF did not demonstrate a control structure that would allow the files to be located within a reasonable period of time. STATEMENT OF CAUSE ADSEF does not maintain an internal control structure for participant files that allows each file to be located within a reasonable period of time. Additionally, they do not have internal control procedure manuals that allow for the validation of the process they carry out and the individuals responsible for compiling, validating, and submitting this report. POSSIBLE ASSERTED EFFECT ADSEF may be including data in this report that has not been corroborated with the participants' physical records. The lack of a uniform process for archiving participant records prevented them from providing us with evidence of the requested records. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control procedures manuals that clearly outline the processes to be followed for data collection, recording, and reporting. Additionally, standardize the way documents related to participant files are filed.
FINDING REFERENCE NUMBER 2023-054 (See Finding Reference Number 2023-023) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis. (5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the statement of condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN ensures the SF– 425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.
FINDING REFERENCE NUMBER 2023-054 (See Finding Reference Number 2023-023) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis. (5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the statement of condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN ensures the SF– 425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.
FINDING REFERENCE NUMBER 2023-056 (See Finding Reference Number 2023-025) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult program to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.
FINDING REFERENCE NUMBER 2023-056 (See Finding Reference Number 2023-025) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult program to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.
FINDING REFERENCE NUMBER 2023-060 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – PENALTY FOR REFUSAL TO WORK / LACK OF CHILD CARE FOR SINGLE CUSTODIAL PARENT OF CHILD UNDER AGE SIX / PENALTY FOR FAILURE TO COMPLY WITH WORK VERIFICATION PLAN TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for special tests and provisions, we selected twenty-five (25) participants from a population of 475 who had been penalized for failing to meet the work requirement or complying with the work verification plan. Of the sample of participants, only ten (10) files were submitted to us for evaluation. Related to the Lack of Child Care requirement for single Custodial Parent of Child Under Age Six, from a population of seven (7) participants identified with this requirement, we requested three (3) files for evaluation, however, we were only given one (1) file. This is a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with this compliance requirement. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with these Special Tests and Provisions because the information in the files was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time.
FINDING 2023-001 DOCUMENT RETENTION SIGNIFICANT DEFICIENCY Federal Program: Title I, Part A Assistance Listing Number: 84.010 Condition The Indiana Department of Education uses data on the poverty levels of students in determining funding amounts for the program. We selected a sample of forty students from the Real Time Data report used in making funding assessments for the year under audit. The School was unable to provide documentation to support the poverty levels of ten of those students. Criteria Per 7 CFR 200.334, “Financial records, supporting documents, statistical records, and all other non- Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” Cause The School did not maintain poverty level documentation for all students reported. Effect We were unable to determine if the poverty levels of all students were properly reported. Funding amounts could have been incorrectly determined. Recommendation We recommend the School develop internal controls requiring the maintenance of student poverty level documentation. Views of Responsible Officials The School’s Corrective Action Plan is included on page 24.
FINDING 2023-001 DOCUMENT RETENTION SIGNIFICANT DEFICIENCY Federal Program: Title I, Part A Assistance Listing Number: 84.010 Condition The Indiana Department of Education uses data on the poverty levels of students in determining funding amounts for the program. We selected a sample of forty students from the Real Time Data report used in making funding assessments for the year under audit. The School was unable to provide documentation to support the poverty levels of ten of those students. Criteria Per 7 CFR 200.334, “Financial records, supporting documents, statistical records, and all other non- Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” Cause The School did not maintain poverty level documentation for all students reported. Effect We were unable to determine if the poverty levels of all students were properly reported. Funding amounts could have been incorrectly determined. Recommendation We recommend the School develop internal controls requiring the maintenance of student poverty level documentation. Views of Responsible Officials The School’s Corrective Action Plan is included on page 24.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.