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.
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 2022-004 Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. The School Corporation did not have adequate policies or procedures to ensure that wage rate provisions were included in, and certified payrolls were submitted for, construction contracts in excess of $2,000 paid from federal grant funds. No certified weekly payrolls were obtained for examination for the two construction projects the School Corporation funded with Elementary and Secondary School Emergency Relief Fund funds. Additionally, wage rate provisions were not included in the contracts. The lack of internal controls and sufficient appropriate audit evidence were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 JAC-CEN-DEL COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 29 CFR 5.5 states in part: (a) The Agency head shall cause or require the contracting officer to insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts listed in ? 5.1, the following clauses . . . (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. . . . (3) Payrolls and basic records. . . . (ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH-347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. . . ." 2 CFR 200 Appendix II states in part: "In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . INDIANA STATE BOARD OF ACCOUNTS 21 JAC-CEN-DEL COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non- Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, 'Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction'). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." Cause Management had not designed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Effect The failure to establish an effective internal control system and retain appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls and retain appropriate supporting documentation to ensure compliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
(#2022-003) Allowable Costs? CFDA No. 84.425N ? COVID-19 HEERF-FIPSE Formula Grant Year Ended ? June 30, 2022 Direct Program Federal Agency ? U.S. Department of Education Criteria ?Institutions must follow the documentation requirements under 2 CFR ? 200.334 to retain financial records, supporting documents, statistical records, and all other institutional records pertinent to lost revenue and the administration of the HEERF grant programs generally for a period of three years from the date of submission of the final expenditure report. Condition ? Documentation to support the estimates for lost revenue was not provided to management timely for review and approval. Cause ?Adequate documentation was not maintained to support the lost revenue estimate. Effect ?Documentation supporting lost revenue estimates was not properly maintained prior to the submission of drawdowns of grant funds. Questioned Costs ? There were no questioned costs noted related to this finding. Context ?This finding was identified during our testing of lost revenues reported as allowable costs. BOCES was able to provide their calculation and method for estimating lost revenue for the program, however, management was not able to provide support for the enrollment numbers used in the estimate. Subsequent to our original request, the Continuing Education Department was able to provide enrollment documentation which supported the estimates selected for testing. Recommendation ? Documentation used in developing the estimates should be maintained in accordance with grant terms, and provided to management for their review and approval prior to the submission of drawdowns. BOCES? Response ? BOCES will ensure that clear and appropriate supporting documentation is in line with grant terms and is provided by the department and reviewed with the Finance Office prior to any submission for grant disbursement.
(#2022-003) Allowable Costs? CFDA No. 84.425N ? COVID-19 HEERF-FIPSE Formula Grant Year Ended ? June 30, 2022 Direct Program Federal Agency ? U.S. Department of Education Criteria ?Institutions must follow the documentation requirements under 2 CFR ? 200.334 to retain financial records, supporting documents, statistical records, and all other institutional records pertinent to lost revenue and the administration of the HEERF grant programs generally for a period of three years from the date of submission of the final expenditure report. Condition ? Documentation to support the estimates for lost revenue was not provided to management timely for review and approval. Cause ?Adequate documentation was not maintained to support the lost revenue estimate. Effect ?Documentation supporting lost revenue estimates was not properly maintained prior to the submission of drawdowns of grant funds. Questioned Costs ? There were no questioned costs noted related to this finding. Context ?This finding was identified during our testing of lost revenues reported as allowable costs. BOCES was able to provide their calculation and method for estimating lost revenue for the program, however, management was not able to provide support for the enrollment numbers used in the estimate. Subsequent to our original request, the Continuing Education Department was able to provide enrollment documentation which supported the estimates selected for testing. Recommendation ? Documentation used in developing the estimates should be maintained in accordance with grant terms, and provided to management for their review and approval prior to the submission of drawdowns. BOCES? Response ? BOCES will ensure that clear and appropriate supporting documentation is in line with grant terms and is provided by the department and reviewed with the Finance Office prior to any submission for grant disbursement.
FINDING 2022-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not designed, nor implemented at the School Corporation's to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The School Corporation completed and submitted four annual Data Collection reports (Reports) for the Elementary and Secondary School Emergency Relief (ESSER) grants. For three of the four Reports tested, the Reports were not supported by the unit's records. The financial information provided did not agree to the data submitted in the Reports; therefore, we could not determine the accuracy of the Reports. Additionally, four of six key line items selected for testing could not be traced to supporting documentation. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not developed a system of internal control that would have ensured compliance with the Reporting compliance requirement. Effect The failure to establish an effective internal control system, as well as retain documentation to support reports, prevented the determination of the School Corporation's compliance with the Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls, as well as retain documentation, to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not designed, nor implemented at the School Corporation's to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The School Corporation completed and submitted four annual Data Collection reports (Reports) for the Elementary and Secondary School Emergency Relief (ESSER) grants. For three of the four Reports tested, the Reports were not supported by the unit's records. The financial information provided did not agree to the data submitted in the Reports; therefore, we could not determine the accuracy of the Reports. Additionally, four of six key line items selected for testing could not be traced to supporting documentation. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not developed a system of internal control that would have ensured compliance with the Reporting compliance requirement. Effect The failure to establish an effective internal control system, as well as retain documentation to support reports, prevented the determination of the School Corporation's compliance with the Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls, as well as retain documentation, to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not designed, nor implemented at the School Corporation's to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The School Corporation completed and submitted four annual Data Collection reports (Reports) for the Elementary and Secondary School Emergency Relief (ESSER) grants. For three of the four Reports tested, the Reports were not supported by the unit's records. The financial information provided did not agree to the data submitted in the Reports; therefore, we could not determine the accuracy of the Reports. Additionally, four of six key line items selected for testing could not be traced to supporting documentation. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not developed a system of internal control that would have ensured compliance with the Reporting compliance requirement. Effect The failure to establish an effective internal control system, as well as retain documentation to support reports, prevented the determination of the School Corporation's compliance with the Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls, as well as retain documentation, to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not designed, nor implemented at the School Corporation's to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The School Corporation completed and submitted four annual Data Collection reports (Reports) for the Elementary and Secondary School Emergency Relief (ESSER) grants. For three of the four Reports tested, the Reports were not supported by the unit's records. The financial information provided did not agree to the data submitted in the Reports; therefore, we could not determine the accuracy of the Reports. Additionally, four of six key line items selected for testing could not be traced to supporting documentation. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not developed a system of internal control that would have ensured compliance with the Reporting compliance requirement. Effect The failure to establish an effective internal control system, as well as retain documentation to support reports, prevented the determination of the School Corporation's compliance with the Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls, as well as retain documentation, to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not designed, nor implemented at the School Corporation's to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The School Corporation completed and submitted four annual Data Collection reports (Reports) for the Elementary and Secondary School Emergency Relief (ESSER) grants. For three of the four Reports tested, the Reports were not supported by the unit's records. The financial information provided did not agree to the data submitted in the Reports; therefore, we could not determine the accuracy of the Reports. Additionally, four of six key line items selected for testing could not be traced to supporting documentation. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not developed a system of internal control that would have ensured compliance with the Reporting compliance requirement. Effect The failure to establish an effective internal control system, as well as retain documentation to support reports, prevented the determination of the School Corporation's compliance with the Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls, as well as retain documentation, to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-009 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The annual Elementary and Secondary School Emergency Relief (ESSER) annual data collection reports (Reports) were prepared by the Treasurer and reviewed and approved by the Director of Curriculum prior to submission; however, the review process in place did not prevent, or detect and correct, errors. Of the six reports tested, four (ESSER I, Year 1 and Year 2, ESSER II, Year 1, and ESSER III Year 1) were not supported by the School Corporation's records. Key line items selected for review and verification were determined to be incorrectly reported on the ESSER I, Year 1 report as well as omitted from the ESSER I, Year 2, ESSER II, Year 1, and ESSER III, Year 1 reports. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 (Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(b) (Uniform Guidance) 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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.302(b) (Revised Uniform Guidance) 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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Cause Management had not established a system of internal controls that would have ensured compliance with the Equipment and Reporting compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Reporting compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-009 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The annual Elementary and Secondary School Emergency Relief (ESSER) annual data collection reports (Reports) were prepared by the Treasurer and reviewed and approved by the Director of Curriculum prior to submission; however, the review process in place did not prevent, or detect and correct, errors. Of the six reports tested, four (ESSER I, Year 1 and Year 2, ESSER II, Year 1, and ESSER III Year 1) were not supported by the School Corporation's records. Key line items selected for review and verification were determined to be incorrectly reported on the ESSER I, Year 1 report as well as omitted from the ESSER I, Year 2, ESSER II, Year 1, and ESSER III, Year 1 reports. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 (Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(b) (Uniform Guidance) 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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.302(b) (Revised Uniform Guidance) 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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Cause Management had not established a system of internal controls that would have ensured compliance with the Equipment and Reporting compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Reporting compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-009 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The annual Elementary and Secondary School Emergency Relief (ESSER) annual data collection reports (Reports) were prepared by the Treasurer and reviewed and approved by the Director of Curriculum prior to submission; however, the review process in place did not prevent, or detect and correct, errors. Of the six reports tested, four (ESSER I, Year 1 and Year 2, ESSER II, Year 1, and ESSER III Year 1) were not supported by the School Corporation's records. Key line items selected for review and verification were determined to be incorrectly reported on the ESSER I, Year 1 report as well as omitted from the ESSER I, Year 2, ESSER II, Year 1, and ESSER III, Year 1 reports. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 (Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(b) (Uniform Guidance) 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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.302(b) (Revised Uniform Guidance) 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 Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Cause Management had not established a system of internal controls that would have ensured compliance with the Equipment and Reporting compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Reporting compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to ensure compliance and comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-011 Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Participation of Private School Children Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425C Federal Award Number and Year (or Other Identifying Number): S425C200018 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Participation of Private School Children Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Participation of Private School Children compliance requirement. The School Corporation did not have effective internal controls in place to ensure that the amount calculated for equitable services on the Governor's Emergency Education Relief Fund (GEER I) application was calculated correctly and that supporting documentation was retained for audit. INDIANA STATE BOARD OF ACCOUNTS 39 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation failed to provide documentation to support the amounts calculated for equitable services on the GEER I application. Due to the lack of supporting documentation, we were unable to determine if the amounts calculated for equitable services were accurate. The lack of internal controls and failure to maintain and provide adequate supporting documentation were isolated to the GEER I application. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." The CARES Act P. CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (Mar. 27, 2020) Section 18005(a) states: "IN GENERAL ? A local educational agency receiving funds under sections 18002 or 18003 of this title shall provide equitable services in the same manner as provided under section 1117 of the ESEA of 1965 to students and teachers in non-public schools, as determined in consultation with representatives of non-public schools." 20 USC 6320(a)(1) states: "To the extent consistent with the number of eligible children identified under section 6315(c) of this title in the school district served by a local educational agency who are enrolled in private elementary schools and secondary schools, a local educational agency shall- (A) after timely and meaningful consultation with appropriate private school officials, provide such children, on an equitable basis and individually or in combination, as requested by the officials to best meet the needs of such children, special educational services, instructional services (including evaluations to determine the progress being made in meeting such students' academic needs), counseling, mentoring, one-on-one tutoring, or other benefits under this part (such as dual or concurrent enrollment, educational radio and television, computer equipment and materials, other technology, and mobile educational services and equipment) that address their needs; and (B) ensure that teachers and families of the children participate, on an equitable basis, in services and activities developed pursuant to section 6318 of this title." 20 USC 6320(c)(1) states: "A local educational agency shall have the final authority, consistent with this section, to calculate the number of children, ages 5 through 17, who are from low-income families and attend private schools by- INDIANA STATE BOARD OF ACCOUNTS 40 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (A) using the same measure of low income used to count public school children; (B) using the results of a survey that, to the extent possible, protects the identity of families of private school students, and allowing such survey results to be extrapolated if complete actual data are unavailable; (C) applying the low-income percentage of each participating public school attendance area, determined pursuant to this section, to the number of private school children who reside in that school attendance area; or (D) using an equated measure of low income correlated with the measure of low income used to count public school children." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." Cause Management had not established a system of internal controls that would have ensured compliance, or that documentation would have been maintained and made available for audit, related to the Special Tests and Provisions - Participation of Private School Children compliance requirement. Effect The failure to establish an effective system of internal controls and to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Special Tests and Provision - Participation of Private School Children compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation be maintained and made available for audit and comply with the grant agreement and the Special Tests and Provision - Participation of Private School Children compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-011 Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Participation of Private School Children Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425C Federal Award Number and Year (or Other Identifying Number): S425C200018 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Participation of Private School Children Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Participation of Private School Children compliance requirement. The School Corporation did not have effective internal controls in place to ensure that the amount calculated for equitable services on the Governor's Emergency Education Relief Fund (GEER I) application was calculated correctly and that supporting documentation was retained for audit. INDIANA STATE BOARD OF ACCOUNTS 39 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation failed to provide documentation to support the amounts calculated for equitable services on the GEER I application. Due to the lack of supporting documentation, we were unable to determine if the amounts calculated for equitable services were accurate. The lack of internal controls and failure to maintain and provide adequate supporting documentation were isolated to the GEER I application. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." The CARES Act P. CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (Mar. 27, 2020) Section 18005(a) states: "IN GENERAL ? A local educational agency receiving funds under sections 18002 or 18003 of this title shall provide equitable services in the same manner as provided under section 1117 of the ESEA of 1965 to students and teachers in non-public schools, as determined in consultation with representatives of non-public schools." 20 USC 6320(a)(1) states: "To the extent consistent with the number of eligible children identified under section 6315(c) of this title in the school district served by a local educational agency who are enrolled in private elementary schools and secondary schools, a local educational agency shall- (A) after timely and meaningful consultation with appropriate private school officials, provide such children, on an equitable basis and individually or in combination, as requested by the officials to best meet the needs of such children, special educational services, instructional services (including evaluations to determine the progress being made in meeting such students' academic needs), counseling, mentoring, one-on-one tutoring, or other benefits under this part (such as dual or concurrent enrollment, educational radio and television, computer equipment and materials, other technology, and mobile educational services and equipment) that address their needs; and (B) ensure that teachers and families of the children participate, on an equitable basis, in services and activities developed pursuant to section 6318 of this title." 20 USC 6320(c)(1) states: "A local educational agency shall have the final authority, consistent with this section, to calculate the number of children, ages 5 through 17, who are from low-income families and attend private schools by- INDIANA STATE BOARD OF ACCOUNTS 40 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (A) using the same measure of low income used to count public school children; (B) using the results of a survey that, to the extent possible, protects the identity of families of private school students, and allowing such survey results to be extrapolated if complete actual data are unavailable; (C) applying the low-income percentage of each participating public school attendance area, determined pursuant to this section, to the number of private school children who reside in that school attendance area; or (D) using an equated measure of low income correlated with the measure of low income used to count public school children." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." Cause Management had not established a system of internal controls that would have ensured compliance, or that documentation would have been maintained and made available for audit, related to the Special Tests and Provisions - Participation of Private School Children compliance requirement. Effect The failure to establish an effective system of internal controls and to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Special Tests and Provision - Participation of Private School Children compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation be maintained and made available for audit and comply with the grant agreement and the Special Tests and Provision - Participation of Private School Children compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.