FINDING 2022-005Subject: COVID-19 - Education Stabilization Fund - ReportingFederal Agency: Department of EducationFederal Program: COVID-19 - Education Stabilization FundAssistance Listings Numbers: 84.425D, 84.425UFederal Award Numbers and Years (or Other Identifying Numbers): S425D20013, S425D210013,S425U210013Pass-Through Entity: Indiana Department of EducationCompliance Requirement: ReportingAudit Findings: Material Weakness, Other MattersCondition and ContextAn effective internal control system was not designed, nor implemented, at the School Corporationto ensure compliance with requirements related to the grant agreement and the Reporting compliancerequirement.The School Corporation completed and submitted four annual Data Collection reports (Reports) forthe Elementary and Secondary School Emergency Relief (ESSER) grants. The Reports were prepared byone employee without an oversite or review process in place to prevent, or detect and correct, errors.Additionally, one of the four Reports tested was not supported by the School Corporation's records.The financial information provided did not agree to all the data submitted in the Report; therefore, we couldnot determine the accuracy of the Report. Additionally, two of six key line items selected for testing couldnot be traced to supporting documentation.The lack of internal controls and noncompliance were systemic issues throughout the audit period.Criteria2 CFR 200.303 states in part:"The non-Federal entity must:(a) Establish and maintain effective internal control over the Federal award that providesreasonable assurance that the non-Federal entity is managing the Federal award incompliance with Federal statutes, regulations, and the terms and conditions of the Federalaward. These internal controls should be in compliance with guidance in 'Standards forInternal Control in the Federal Government' issued by the Comptroller General of theUnited States or the 'Internal Control Integrated Framework', issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). . . ."2 CFR 200.302(b) states in part:"The financial management system of each non-Federal entity must provide for the following:. . .(2) Accurate, current, and complete disclosure of the financial results of each Federalaward or program in accordance with the reporting requirements set forth in ?? 200.328and 200.329. . . ."34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and formatthat assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out otherresponsibilities under the program."2 CFR 200.334 states in part:"Financial records, supporting documents, statistical records, and all other non-Federal entityrecords pertinent to a Federal award must be retained for a period of three years from the dateof submission of the final expenditure report or, for Federal awards that are renewed quarterlyor 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.. . ."34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance withprogram requirements."CauseManagement had not developed a system of internal controls that would have ensured compliancewith the Reporting compliance requirement.EffectThe failure to establish an effective internal control system enabled noncompliance to go undetected.Noncompliance with the grant agreement and the Reporting compliance requirement could resultin the loss of future federal funds to the School Corporation.Questioned CostsThere were no questioned costs identified.RecommendationWe recommended that the School Corporation's management establish effective internal controlsto ensure compliance and comply with the grant agreement and the Reporting compliance requirement.Views of Responsible OfficialsFor the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Department of Health and Human Services Temporary Assistance for Needy Families (TANF), Federal Assistance Listing # 93.558 Pass Through Virginia Department of Social Services, Pass Through Entity Identifying Number BEN-21-054 Type of Finding: Significant Deficiency in Internal Control over Compliance with Federal Awards Criteria: The Organization should have effective internal controls in place over review of intake forms, per 2 CFR 200.303 and 2 CFR 200.334. Condition: During our audit, it was noted that there was not an effective review of intake forms. Context: During testing, 6 of 60 intake forms tested to not contain appropriate signatures by individuals or management noting approval. The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: N/A Cause/Effect: Internal control processes over intake forms were not operating effectively from July 2021 through June 2022. Identification of Repeat Finding: N/A Recommendation: We recommend that Cornerstones implements a review process to ensure that intake forms are complete and accurate as possess all appropriate signatures. Views of Responsible Officials and Correction Action: Management’s response is reported in “Management’s Views and Corrective Action Plan” included at the end of this report.
Department of Health and Human Services Temporary Assistance for Needy Families (TANF), Federal Assistance Listing # 93.558 Pass Through Virginia Department of Social Services, Pass Through Entity Identifying Number BEN-21-054 Type of Finding: Significant Deficiency in Internal Control over Compliance with Federal Awards Criteria: The Organization should have processes and procedures in place to keep and maintain client records, per 2 CFR 200.303 and 2 CFR 200.334. Condition: During our audit, we noted that the Organization was unable to find supporting records for individuals that received services as part of a federal program, leading to noncompliance with the program. Context: During testing, 4 of 60 individuals tested did not have the appropriate records. The sample was not intended to be, and was not, a statistically valid sample. Cause/Effect: Internal control processes over proper maintenance of clients’ records were not operating effectively, causing eligibility documentation to not be located. Questioned Costs: N/A Identification of Repeat Finding: N/A Recommendation: We recommend procedures are implemented to ensure proper maintenance of client records. Views of Responsible Officials and Correction Action: Management’s response is reported in “Management’s Views and Corrective Action Plan” included at the end of this report.
Department of Health and Human Services Temporary Assistance for Needy Families (TANF), Federal Assistance Listing # 93.558 Pass Through Virginia Department of Social Services, Pass Through Entity Identifying Number BEN-21-054 Type of Finding: Significant Deficiency in Internal Control over Compliance with Federal Awards Criteria: The Organization should have effective internal controls in place over review of intake forms, per 2 CFR 200.303 and 2 CFR 200.334. Condition: During our audit, it was noted that there was not an effective review of intake forms. Context: During testing, 6 of 60 intake forms tested to not contain appropriate signatures by individuals or management noting approval. The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: N/A Cause/Effect: Internal control processes over intake forms were not operating effectively from July 2021 through June 2022. Identification of Repeat Finding: N/A Recommendation: We recommend that Cornerstones implements a review process to ensure that intake forms are complete and accurate as possess all appropriate signatures. Views of Responsible Officials and Correction Action: Management’s response is reported in “Management’s Views and Corrective Action Plan” included at the end of this report.
Department of Health and Human Services Temporary Assistance for Needy Families (TANF), Federal Assistance Listing # 93.558 Pass Through Virginia Department of Social Services, Pass Through Entity Identifying Number BEN-21-054 Type of Finding: Significant Deficiency in Internal Control over Compliance with Federal Awards Criteria: The Organization should have processes and procedures in place to keep and maintain client records, per 2 CFR 200.303 and 2 CFR 200.334. Condition: During our audit, we noted that the Organization was unable to find supporting records for individuals that received services as part of a federal program, leading to noncompliance with the program. Context: During testing, 4 of 60 individuals tested did not have the appropriate records. The sample was not intended to be, and was not, a statistically valid sample. Cause/Effect: Internal control processes over proper maintenance of clients’ records were not operating effectively, causing eligibility documentation to not be located. Questioned Costs: N/A Identification of Repeat Finding: N/A Recommendation: We recommend procedures are implemented to ensure proper maintenance of client records. Views of Responsible Officials and Correction Action: Management’s response is reported in “Management’s Views and Corrective Action Plan” included at the end of this report.
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, it was identified that the Organization could not locate invoices or check stubs for five out of sixty items tested for non-payroll expenses within a major federal program. 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 – 1,839 items totaling $1,243,944 • ALN No. 93.788 – 1,502 items totaling $2,285,983 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 - 51 items totaling $26,145, including projected errors over the total population totaling $348,063 • ALN No. 93.788 - 6 items totaling $18,183, including projected errors over the total population totaling $165,074 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 - $26,145 • ALN No. 93.788 - $18,183 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 – Not a repeat finding 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 – 1,839 items totaling $1,243,944 • ALN No. 93.788 – 1,502 items totaling $2,285,983 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 - 51 items totaling $26,145, including projected errors over the total population totaling $348,063 • ALN No. 93.788 - 6 items totaling $18,183, including projected errors over the total population totaling $165,074 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 - $26,145 • ALN No. 93.788 - $18,183 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 – Not a repeat finding 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.
2022-002 Improve Internal Controls and Documentation over Allowable Costs and Eligibility Determinations Federal Program Information Federal Agency: Department of the Treasury Award Name: COVID-19 Emergency Rental Assistance Program Assistance Listing Number: 21.023 Award Year: 2022 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Per 2 CFR 200.303, the County is required to establish and maintain effective internal controls over federal programs to provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. Additionally, 2 CFR 200.334 requires the retention of records and supporting documentation to demonstrate eligibility determinations and allowability of expenditures under the program. Condition and Context During our audit, we tested a sample of 40 selections for allowable costs, as well as a sample of 40 for individual eligibility determinations under the program in which 35 selections were leveraged between the two tests. For 8 of the items selected for testing under allowable cost compliance and eligibility requirements, the County was unable to provide some or all of the required supporting documentation to demonstrate that individuals met the program’s eligibility requirements and that costs were allowable. The documentation was retained in an online portal to which the County no longer had access at the time of our audit procedures. Cause The County did not establish sufficient procedures or controls to ensure ongoing access to required supporting documentation maintained in the external portal used for program administration. Effect or Potential Effect Due to the weakness in internal controls noted above, the County could not demonstrate compliance with eligibility and allowable cost requirements for the sampled transactions. This also constitutes noncompliance with record retention requirements and impairs the ability for sufficient procedures to be performed over the program. Questioned Costs Due to the condition noted above, we were unable to determine if the costs charged to the applicable grant are allowable. Recommendation The County should implement policies and procedures to ensure required documentation for the program is retained in a manner that ensures continued access, even if administration platforms change or external portals are no longer accessible. The County should also periodically verify that it retains all necessary support for program transactions as required under federal regulations. Views of Responsible Official and Planned Corrective Action Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021; W912L2-22-2-1000, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Defense Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $125,288 Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows: • $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms. • $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form. Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created. Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program 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 §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). 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). Recommendations—The Department should: 1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program. 2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program. 3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021; W912L2-22-2-1000, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Defense Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $125,288 Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows: • $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms. • $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form. Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created. Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program 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 §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). 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). Recommendations—The Department should: 1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program. 2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program. 3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.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 (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following: • The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report. • The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report. • The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them. Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively 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. Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor 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. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required 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 could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division 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). Further, 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. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines. 2. Follow its policies and procedures 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. 3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process. 4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The ERA Program 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 ERA program is referred to as ERA 1. ERA 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 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.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 (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following: • The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report. • The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report. • The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them. Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively 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. Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor 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. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required 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 could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division 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). Further, 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. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines. 2. Follow its policies and procedures 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. 3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process. 4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The ERA Program 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 ERA program is referred to as ERA 1. ERA 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 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.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 (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following: • The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report. • The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report. • The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them. Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively 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. Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor 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. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required 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 could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division 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). Further, 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. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines. 2. Follow its policies and procedures 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. 3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process. 4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The ERA Program 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 ERA program is referred to as ERA 1. ERA 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 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.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 (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following: • The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report. • The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report. • The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them. Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively 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. Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor 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. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required 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 could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division 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). Further, 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. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines. 2. Follow its policies and procedures 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. 3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process. 4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The ERA Program 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 ERA program is referred to as ERA 1. ERA 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 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.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 (ERA) 1 and 2 programs, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report some information. Further, it did not retain some reports submitted to the federal agency or the associated documentation.1 Specifically, for 8 reports we selected for test work, we found the following: • The Division did not retain some documentation—The Division did not retain documentation, like system reports, queries, or screenshots, to support the information it reported on 3 monthly reports: the ERA 1 October 2021 and March 2022 compliance reports and the ERA 2 May 2022 compliance report. • The Division did not accurately report some information—The Division failed to report any expenditures for the ERA 2 November 2021 monthly report even though we identified ERA 2 expenditures recorded during the month in the system. It also incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures, project data, and participant demographics in all amounts reported as being all ERA 1 program information for the ERA 1 October 1, 2021 through December 31, 2021, compliance report. Finally, it incorrectly reported comingled ERA 1 and ERA 2 program applicant expenditures as being all ERA 1 program applicant expenditures within the cash disbursements and the federal share of expenditures line items rather than reporting this information for both programs separately as required, and understated cash receipts and the federal share of unliquidated obligations by $19.2 million and $4.1 million, respectively, for the ERA 1 October 1, 2021 through December 31, 2021, financial report. • The Division did not retain reports and associated documentation—The Division did not provide us the reports and related supporting documentation for the ERA 2 April 1, 2022 through June 30, 2022, compliance report and financial report even though the federal agency website indicated the reports were submitted. Therefore, we were unable to test them. Effect—The Division’s reporting inaccurate or unsupported program information and not retaining reports and associated documentation for audit purposes results in the federal agency being unable to rely on the reports to effectively 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. Cause—The Division reported that it contracted to use a new benefits system for the ERA program in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports. Although the Division’s policy was to record applicant expenditures for months 1-15 to ERA 1 and months 16-18 to ERA 2, this was not the criteria established for the federal reporting dashboard until February 1, 2022, when the contractor corrected the system programming error, which resulted in the Division reporting ERA 2 information as ERA 1 information in all monthly and quarterly reports prior to February 1, 2022. When implementing the new system and after the contractor 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. Additionally, during the ERA reporting review and approval process, the Division did not verify the reported program information and the federal reporting dashboard to the underlying system data. Finally, the Division did not follow its policies and procedures to retain submitted reports or documentation to support the information it reported. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERA award to the federal agency. For the monthly reports, the Division is required to report monthly key information, such as the number of participating households that received ERA of any kind and the total ERA monies expended to or for participating households on behalf of eligible households, which is used by the federal agency for reallocation purposes. For the quarterly financial and compliance reports, the Division is required 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 could monitor performance and compliance, including funding needs and the spending of any reallocated monies.2 In addition, the Division’s policies and procedures and federal regulation requires the Division 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). Further, 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. Develop and implement written policies and procedures to ensure the system used to process ERA claims and report program information produces summarized data on its federal reporting dashboard that are complete and accurate and comply with the federal agency’s reporting guidelines. 2. Follow its policies and procedures 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. 3. Verify the ERA-reported program information and the federal reporting dashboard to the underlying system data during each report’s review and approval process. 4. Prepare and retain detailed documentation and submitted reports, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERA award. 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The ERA Program 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 ERA program is referred to as ERA 1. ERA 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 U.S. Department of the Treasury. (2022, December). Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/20/2023 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, 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). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 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 and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
FINDING 2022-002 DOCUMENT RETENTION (REPEAT FINDING) SIGNIFICANT DEFICIENCY Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553 & 10.555 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.? Condition Three claims for meal reimbursement were selected for testing. The School was unable to provide records of meals served that directly reconciled with those claims. A reconciliation was provided showing total meals served during the year compared to total meals claimed. A variance was noted, but this variance was below the $25,000 threshold for reporting questioned costs. Cause The School did not maintain documentation for each individual claim. Effect Reconciliation of meals served data to individual claims was not possible. Recommendation We recommend the School develop internal controls requiring the maintenance of documentation of meals served for the individual claims submitted for the program.
FINDING 2022-002 DOCUMENT RETENTION (REPEAT FINDING) SIGNIFICANT DEFICIENCY Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553 & 10.555 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.? Condition Three claims for meal reimbursement were selected for testing. The School was unable to provide records of meals served that directly reconciled with those claims. A reconciliation was provided showing total meals served during the year compared to total meals claimed. A variance was noted, but this variance was below the $25,000 threshold for reporting questioned costs. Cause The School did not maintain documentation for each individual claim. Effect Reconciliation of meals served data to individual claims was not possible. Recommendation We recommend the School develop internal controls requiring the maintenance of documentation of meals served for the individual claims submitted for the program.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, 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 and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, 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 and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, 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 and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, 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 and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, 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 and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, 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 and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Finding ? 2022-001 ? Inadequate Records Retention Federal AL# 14.241 ? Housing Opportunities for Persons with AIDS Criteria: 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 (2 CFR ?200.334). Condition: Documentation supporting the Housing Quality Standards inspections to ensure housing met quality standards listed in 24 CFR ?574.310(b)(1)-(2) for the special tests and provisions compliance requirement for AL# 14.241 was missing. Cause and Effect: Policies and procedures regarding records retention is not in accordance with 2 CFR ?200.334 as it does not explicitly state a time period for records retention. As a result, events occurred during the year with no records retained as support. Recommendation: We recommend management update the written records retention policies and procedures to include a time period that is in accordance with 2 CFR ?200.334 and then communicate that policy to all employees to following during the daily course of operations. Additionally, we recommend an annual review of the policies and procedures to ensure continued compliance with 2 CFR ?200.334. Management?s Response: Homeless Alliance management agrees with the finding.