FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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). . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "(a) Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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). . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "(a) Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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). . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "(a) Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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). . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "(a) Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 Subject: Title I Grants to Local Educational Agencies - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A190014, S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. Due to the lack of internal controls, the School Corporation had the following errors for payroll expenditures: 1. Two employees' gross payroll and benefits were reimbursed from the grant; however, their duties were not for the Title I program which resulted in questioned costs of $61,266. 2. One employee's gross payroll was split-funded between Title I and another School Corporation fund. There were no time and effort records to substantiate the gross payroll amount charged to the grant which resulted in questioned costs of $60,121. 3. One employee was overpaid per the contracted amount which resulted in questioned costs of $8,945. The School Corporation determined in May 2023 that the two employees' payroll and benefits were being charged to the grant when they should not have been and corrected the issue in its financial software system, making the correction back to July 1, 2022. The School Corporation, however, failed to notify the Indiana Department of Education that the School Corporation had been over reimbursed. The School Corporation received reimbursement for several gross payroll expenditures from one Title I grant fund. The School Corporation later made journal entries to move these gross payroll expenditures to another grant fund and received reimbursement again for those same gross payroll expenditures. As the School Corporation received reimbursement twice for the same gross payroll expenditures, the second reimbursement of the expenditures was considered questioned costs. The total amount of questions costs was $99,117. Total known questioned costs of $229,449 as detailed above represent 25 percent of the total federal expenditures for Title I. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 34 CFR 76.700 states: "A State and a subgrantee shall comply with § 76.500, the State plan, applicable statutes, regulations, and approved applications, and shall use Federal funds in accordance with those statutes, regulations, plan, and applications." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs were reimbursed that were not for Title I purposes, not supported by time and effort logs, overpaid, and reimbursed twice for the same expenditures. In addition, overpayment of reimbursements received were retained by the School Corporation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $229,449 were identified in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 Subject: Title I Grants to Local Educational Agencies - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A190014, S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. Due to the lack of internal controls, the School Corporation had the following errors for payroll expenditures: 1. Two employees' gross payroll and benefits were reimbursed from the grant; however, their duties were not for the Title I program which resulted in questioned costs of $61,266. 2. One employee's gross payroll was split-funded between Title I and another School Corporation fund. There were no time and effort records to substantiate the gross payroll amount charged to the grant which resulted in questioned costs of $60,121. 3. One employee was overpaid per the contracted amount which resulted in questioned costs of $8,945. The School Corporation determined in May 2023 that the two employees' payroll and benefits were being charged to the grant when they should not have been and corrected the issue in its financial software system, making the correction back to July 1, 2022. The School Corporation, however, failed to notify the Indiana Department of Education that the School Corporation had been over reimbursed. The School Corporation received reimbursement for several gross payroll expenditures from one Title I grant fund. The School Corporation later made journal entries to move these gross payroll expenditures to another grant fund and received reimbursement again for those same gross payroll expenditures. As the School Corporation received reimbursement twice for the same gross payroll expenditures, the second reimbursement of the expenditures was considered questioned costs. The total amount of questions costs was $99,117. Total known questioned costs of $229,449 as detailed above represent 25 percent of the total federal expenditures for Title I. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 34 CFR 76.700 states: "A State and a subgrantee shall comply with § 76.500, the State plan, applicable statutes, regulations, and approved applications, and shall use Federal funds in accordance with those statutes, regulations, plan, and applications." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs were reimbursed that were not for Title I purposes, not supported by time and effort logs, overpaid, and reimbursed twice for the same expenditures. In addition, overpayment of reimbursements received were retained by the School Corporation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $229,449 were identified in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Federal Agencies: Department of Education Program Names: Education Stabilization Fund ALN #s: 84.425F Award Numbers: P425F202766 - 20B; Federal Award Year 2022 - 2023 Questioned Costs: $29,018 2023-006. Finding: Period of Performance – Service Period Beyond Grant’s Period of Performance Northern Illinois University (the University) charged an expenditure to the grant whereby a portion of the expenditure had a service period extending beyond the grant's period of performance, and the University’s controls did not detect the error. For one out of 42 institutional expenditures tested (2.4%), a portion of one expenditure had a service period through November 28, 2027, which extends beyond the grant's period of performance of June 30, 2023, and was charged to the grant for reimbursement. The total amount charged extending beyond the period of performance was $29,018. The sample was not intended to be, and was not, a statistically valid sample. The period of performance for the Higher Education Emergency Relief Fund - Institutional Awarded ended on June 30, 2023. Uniform Grant Guidance (2 CFR 200.403(h)) states that costs must be incurred during the approved budget period. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure only expenditures within the period of performance are charged to the grant. University officials stated this was due to employee misapplication of the period of performance guidance for this maintenance agreement. Charging an expenditure outside of the period of performance could result in the University repaying the amount requested for reimbursement or loss of future funding. (Finding Code No. 2023-006) Recommendation: We recommend the University review current processes, policies and procedures to ensure only expenditures within the period of performance are charged to a grant. University Response: Accepted. This was an isolated occurrence resulting from various policy guidance governing HEERF funding. The University has controls to ensure that only expenditures within the period of performance are charged to the grant. The University will provide additional training on cost allocation to staff. In addition, the University is taking immediate steps to resolve the questioned cost.
2023-002 ACTIVITIES ALLOWED OR UNALLOWED (REPEAT OF PRIOR YEAR FINDING 2022-02) Federal Program Information: Federal Agency and Program Name Federal Assistance Listing Number U.S. Department of Labor, WIOA Cluster, 17.258/17.259/17.278 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.403(g) states that costs must “Be adequately documented.” Condition: During our testing of activities allowed or unallowed, for 11 of the 60 nonpayroll items tested, management could not provide adequate support that the charges were properly reviewed and approved prior to payment. Questioned Costs: Unknown Context: Total federal expenditures for the WIOA Cluster were $4,165,604 for the year ended June 30, 2023. Cause: The Board did not demonstrate that proper internal controls are in place and operating effectively to ensure that unallowable charges to the federal program do not occur. Effect: Unallowable payments to the federal program may have occurred due to the lack of effective internal controls in place. Recommendation: We recommend that the Board design and implement controls to ensure that all charges to federal programs are adequately reviewed and approved prior to payment. Views of Responsible Officials: We agree with the finding and will take the necessary corrective actions as noted in the corrective action plan attached.
2023-002 ACTIVITIES ALLOWED OR UNALLOWED (REPEAT OF PRIOR YEAR FINDING 2022-02) Federal Program Information: Federal Agency and Program Name Federal Assistance Listing Number U.S. Department of Labor, WIOA Cluster, 17.258/17.259/17.278 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.403(g) states that costs must “Be adequately documented.” Condition: During our testing of activities allowed or unallowed, for 11 of the 60 nonpayroll items tested, management could not provide adequate support that the charges were properly reviewed and approved prior to payment. Questioned Costs: Unknown Context: Total federal expenditures for the WIOA Cluster were $4,165,604 for the year ended June 30, 2023. Cause: The Board did not demonstrate that proper internal controls are in place and operating effectively to ensure that unallowable charges to the federal program do not occur. Effect: Unallowable payments to the federal program may have occurred due to the lack of effective internal controls in place. Recommendation: We recommend that the Board design and implement controls to ensure that all charges to federal programs are adequately reviewed and approved prior to payment. Views of Responsible Officials: We agree with the finding and will take the necessary corrective actions as noted in the corrective action plan attached.
2023-002 ACTIVITIES ALLOWED OR UNALLOWED (REPEAT OF PRIOR YEAR FINDING 2022-02) Federal Program Information: Federal Agency and Program Name Federal Assistance Listing Number U.S. Department of Labor, WIOA Cluster, 17.258/17.259/17.278 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.403(g) states that costs must “Be adequately documented.” Condition: During our testing of activities allowed or unallowed, for 11 of the 60 nonpayroll items tested, management could not provide adequate support that the charges were properly reviewed and approved prior to payment. Questioned Costs: Unknown Context: Total federal expenditures for the WIOA Cluster were $4,165,604 for the year ended June 30, 2023. Cause: The Board did not demonstrate that proper internal controls are in place and operating effectively to ensure that unallowable charges to the federal program do not occur. Effect: Unallowable payments to the federal program may have occurred due to the lack of effective internal controls in place. Recommendation: We recommend that the Board design and implement controls to ensure that all charges to federal programs are adequately reviewed and approved prior to payment. Views of Responsible Officials: We agree with the finding and will take the necessary corrective actions as noted in the corrective action plan attached.
2023-002 ACTIVITIES ALLOWED OR UNALLOWED (REPEAT OF PRIOR YEAR FINDING 2022-02) Federal Program Information: Federal Agency and Program Name Federal Assistance Listing Number U.S. Department of Labor, WIOA Cluster, 17.258/17.259/17.278 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.403(g) states that costs must “Be adequately documented.” Condition: During our testing of activities allowed or unallowed, for 11 of the 60 nonpayroll items tested, management could not provide adequate support that the charges were properly reviewed and approved prior to payment. Questioned Costs: Unknown Context: Total federal expenditures for the WIOA Cluster were $4,165,604 for the year ended June 30, 2023. Cause: The Board did not demonstrate that proper internal controls are in place and operating effectively to ensure that unallowable charges to the federal program do not occur. Effect: Unallowable payments to the federal program may have occurred due to the lack of effective internal controls in place. Recommendation: We recommend that the Board design and implement controls to ensure that all charges to federal programs are adequately reviewed and approved prior to payment. Views of Responsible Officials: We agree with the finding and will take the necessary corrective actions as noted in the corrective action plan attached.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Grant Title: Title I Grants to Local Educational Agencies (Title I) Federal Award Number and Year: 2023 Assistance Listing #: 84.010A Federal Agency: US Department of Education Pass-through Entity number: 41 Pass-through Agency: WV Department of Education Grant Title: Supporting Effective Instruction State Grants (Title II) Federal Award Number and Year: 2023 Assistance Listing #: 84.367 and 84.367A Federal Agency: US Department of Education Pass-through Entity number: 40 Pass-through Agency: WV Department of Education Grant Title: COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund - Education Stabilization Fund (ESSER) Federal Award Number and Year: 2023 Assistance Listing #: 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52 Pass-through Agency: WV Department of Education CONDITION: Several expenditures were not properly approved by the Federal Program Directors. In addition, signed purchase orders or other supporting documentation were not available for all expenditures. Management did not ensure that expenditures were allowable for the Title I, Title II, and ESSER programs. CONTEXT: Specifically, we identified the following: Sixty non-payroll expenditure transactions were sampled from a population of 204 for Title I Grants to Local Education Agencies, of which Fifty-seven expenditures, or 95% of the sample size, totaling $208,000, did not have Program Director approval prior to payment. Fourteen expenditures, or 23% of the sample size, totaling $144,290, in which the contract was not available for review for contracted services. Twenty-three expenditures, or 38% of the sample size, totaling $30,152, in which purchase orders were not signed. One expenditure, or 2% of the sample size, totaling $2,783, in which an itemized invoice was not available for review. Three expenditures, or 5% of the sample size, totaling $8,003, in which the expenditure was not properly coded. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Eleven expenditures, or 18% of the sample size, totaling $25,811, in which the purchase order was dated after the invoice. In addition, one expenditure was $120 more than the approved purchase order. One expenditure, or 2% of the sample size, totaling $23, in which State sales tax was paid. Twenty-three expenditures, or 38% of the sample size, totaling $25,989, which were not supported with adequate documentation. Nine non-payroll expenditures were sampled from a population of 53 for the Supporting Effective Instruction State Grants program (Title II), of which Three expenditures, or 33% of the sample size, totaling $2,827, did not have Program Director approval prior to payment. Four expenditures, or 44% of the sample size, totaling $6,545, in which the purchase order was not signed. Two expenditures, or 22% of the sample size, totaling $3,195, in which the purchase order was dated after the invoice. Sixty non-payroll expenditure transactions were sampled from a population of 93 for the COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief (ESSER) Fund - Education Stabilization Fund, of which Fifty-four expenditures, or 90% of the sample size, totaling $3,136,290, did not have Program Director approval prior to payment. One expenditure, or 2% of the sample size, totaling $27,665, in which the expenditure was not properly coded. Nineteen expenditures, or 32% of the sample size, totaling $176,763, in which the contract was not available for review for contracted services. Twenty-one expenditures, or 35% of the sample size, totaling $814,912, in which the purchase order was not signed. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Twenty-four expenditures, or 40% of the sample size, totaling $940,689, in which the purchase order was dated after the invoice. In addition, one expenditure was $12,000 more than the approved purchase order. Sixteen expenditures, totaling $81,698, that did not have any bid documentation available for review. Ten expenditures, totaling $143,731, were not included in the approved ESSER budget. Six expenditures, totaling $118,731, in which ESSER funds were used to match other federal funds. Three expenditures, totaling $32,460, for activities such as passes or tickets where there was no support to indicate who received the passes or tickets. The final cost of a construction project was $81,589 more than the original bid and also exceeded the next two highest original bids with no documentation available for review regarding change orders or approvals thereof. The Board allowed a construction project to begin knowing that there was a deficit of $107,246 and no known available funding to complete the project. In addition, we tested 20 personnel files and related payroll expenditures for the above federal programs and noted the following items: One employee was overpaid $1,775 for supplemental duties based on support available for review. Six employees did not have a proper verification of education in their file. Five employees did not have a valid employment contract in their file. Four employees were paid supplements, totaling $55,351, and did not have support in their file. Five employees did not have a valid extra-duty employment contract in their file. Four employees did not have an IRS W-4 withholding form. Ten employees did not have a WV IT-104 withholding form. Twenty employees did not have voluntary withholding forms available for review. CRITERIA: Proper internal controls include maintaining an adequate filing system in order to safeguard records and documents and procedures that ensure all purchases are approved by reconciling a purchase order to the invoice from the vendor prior to payment. Additionally, Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.334 states, in part, that: "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." Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.403 states, in part, that: "Except where otherwise authorized by statue, costs must meet the following general criteria in order to be allowable under Federal Awards: ...(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period... (g) Be adequately documented." Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Subpart E §75.604 states, in part, that: "A grantee shall ensure that sufficient funds are available to meet any non-Federal share of the cost of constructing the facility." QUESTIONED COSTS: Unknown. CAUSE: Procedures were not in place to ensure that invoices and supporting documentation were maintained for all expenditures and that each expenditure was properly approved. Management of the Board does not have controls in place to comply with the Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. EFFECT: Certain funds were not expended in accordance with requirements of their respective programs, and auditors were unable to determine the allowability of expenditures due to inadequate documentation. This issue contributed to the disclaimer of opinion on compliance for the Title I, Title II, and ESSER Programs. REPEAT FINDING: No RECOMMENDATION: Board officials should establish and follow procedures to require: All purchase orders be issued prior to the purchase and receipt of the invoice, All expenditures be no greater than the remaining amount on their corresponding blanket purchase orders, Each expenditure be coded in accordance with the Board of Education's chart of accounts, Contracts for contracted services be available for review, and All personnel files be complete and have adequate support for payroll expenditures. The officials of the Upshur County Board of Education should review the existing procedures and controls over federal award expenditures to determine that these controls are implemented, and working effectively to ensure that expenditures are properly authorized prior to payment. Board officials should ensure that all expenditures are properly authorized by the respective program directors. The Board officials should consider additional training, internal reviews, cross-training of employees, and other measures as deemed appropriate to ensure existing controls are implemented. Management of the Upshur County Board of Education should follow the guidance set forth in Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Board has developed procedures to ensure that all purchased orders are approved before orders are placed, all expenditures are properly authorized by the respective program director and supporting documentation is adequately maintained. The Board is using a requisition form in Droplet to achieve this goal. All employees authorized to make or approve purchases have been trained on purchasing procedures outlined in the Purchasing Policies and Procedures and Procedures Manual for Local Educational Agencies in the State of West Virginia by the WVDE Office of School Finance on 2/23/2024.
Grant Title: Title I Grants to Local Educational Agencies (Title I) Federal Award Number and Year: 2023 Assistance Listing #: 84.010A Federal Agency: US Department of Education Pass-through Entity number: 41 Pass-through Agency: WV Department of Education Grant Title: Supporting Effective Instruction State Grants (Title II) Federal Award Number and Year: 2023 Assistance Listing #: 84.367 and 84.367A Federal Agency: US Department of Education Pass-through Entity number: 40 Pass-through Agency: WV Department of Education Grant Title: COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund - Education Stabilization Fund (ESSER) Federal Award Number and Year: 2023 Assistance Listing #: 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52 Pass-through Agency: WV Department of Education CONDITION: Several expenditures were not properly approved by the Federal Program Directors. In addition, signed purchase orders or other supporting documentation were not available for all expenditures. Management did not ensure that expenditures were allowable for the Title I, Title II, and ESSER programs. CONTEXT: Specifically, we identified the following: Sixty non-payroll expenditure transactions were sampled from a population of 204 for Title I Grants to Local Education Agencies, of which Fifty-seven expenditures, or 95% of the sample size, totaling $208,000, did not have Program Director approval prior to payment. Fourteen expenditures, or 23% of the sample size, totaling $144,290, in which the contract was not available for review for contracted services. Twenty-three expenditures, or 38% of the sample size, totaling $30,152, in which purchase orders were not signed. One expenditure, or 2% of the sample size, totaling $2,783, in which an itemized invoice was not available for review. Three expenditures, or 5% of the sample size, totaling $8,003, in which the expenditure was not properly coded. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Eleven expenditures, or 18% of the sample size, totaling $25,811, in which the purchase order was dated after the invoice. In addition, one expenditure was $120 more than the approved purchase order. One expenditure, or 2% of the sample size, totaling $23, in which State sales tax was paid. Twenty-three expenditures, or 38% of the sample size, totaling $25,989, which were not supported with adequate documentation. Nine non-payroll expenditures were sampled from a population of 53 for the Supporting Effective Instruction State Grants program (Title II), of which Three expenditures, or 33% of the sample size, totaling $2,827, did not have Program Director approval prior to payment. Four expenditures, or 44% of the sample size, totaling $6,545, in which the purchase order was not signed. Two expenditures, or 22% of the sample size, totaling $3,195, in which the purchase order was dated after the invoice. Sixty non-payroll expenditure transactions were sampled from a population of 93 for the COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief (ESSER) Fund - Education Stabilization Fund, of which Fifty-four expenditures, or 90% of the sample size, totaling $3,136,290, did not have Program Director approval prior to payment. One expenditure, or 2% of the sample size, totaling $27,665, in which the expenditure was not properly coded. Nineteen expenditures, or 32% of the sample size, totaling $176,763, in which the contract was not available for review for contracted services. Twenty-one expenditures, or 35% of the sample size, totaling $814,912, in which the purchase order was not signed. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Twenty-four expenditures, or 40% of the sample size, totaling $940,689, in which the purchase order was dated after the invoice. In addition, one expenditure was $12,000 more than the approved purchase order. Sixteen expenditures, totaling $81,698, that did not have any bid documentation available for review. Ten expenditures, totaling $143,731, were not included in the approved ESSER budget. Six expenditures, totaling $118,731, in which ESSER funds were used to match other federal funds. Three expenditures, totaling $32,460, for activities such as passes or tickets where there was no support to indicate who received the passes or tickets. The final cost of a construction project was $81,589 more than the original bid and also exceeded the next two highest original bids with no documentation available for review regarding change orders or approvals thereof. The Board allowed a construction project to begin knowing that there was a deficit of $107,246 and no known available funding to complete the project. In addition, we tested 20 personnel files and related payroll expenditures for the above federal programs and noted the following items: One employee was overpaid $1,775 for supplemental duties based on support available for review. Six employees did not have a proper verification of education in their file. Five employees did not have a valid employment contract in their file. Four employees were paid supplements, totaling $55,351, and did not have support in their file. Five employees did not have a valid extra-duty employment contract in their file. Four employees did not have an IRS W-4 withholding form. Ten employees did not have a WV IT-104 withholding form. Twenty employees did not have voluntary withholding forms available for review. CRITERIA: Proper internal controls include maintaining an adequate filing system in order to safeguard records and documents and procedures that ensure all purchases are approved by reconciling a purchase order to the invoice from the vendor prior to payment. Additionally, Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.334 states, in part, that: "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." Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.403 states, in part, that: "Except where otherwise authorized by statue, costs must meet the following general criteria in order to be allowable under Federal Awards: ...(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period... (g) Be adequately documented." Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Subpart E §75.604 states, in part, that: "A grantee shall ensure that sufficient funds are available to meet any non-Federal share of the cost of constructing the facility." QUESTIONED COSTS: Unknown. CAUSE: Procedures were not in place to ensure that invoices and supporting documentation were maintained for all expenditures and that each expenditure was properly approved. Management of the Board does not have controls in place to comply with the Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. EFFECT: Certain funds were not expended in accordance with requirements of their respective programs, and auditors were unable to determine the allowability of expenditures due to inadequate documentation. This issue contributed to the disclaimer of opinion on compliance for the Title I, Title II, and ESSER Programs. REPEAT FINDING: No RECOMMENDATION: Board officials should establish and follow procedures to require: All purchase orders be issued prior to the purchase and receipt of the invoice, All expenditures be no greater than the remaining amount on their corresponding blanket purchase orders, Each expenditure be coded in accordance with the Board of Education's chart of accounts, Contracts for contracted services be available for review, and All personnel files be complete and have adequate support for payroll expenditures. The officials of the Upshur County Board of Education should review the existing procedures and controls over federal award expenditures to determine that these controls are implemented, and working effectively to ensure that expenditures are properly authorized prior to payment. Board officials should ensure that all expenditures are properly authorized by the respective program directors. The Board officials should consider additional training, internal reviews, cross-training of employees, and other measures as deemed appropriate to ensure existing controls are implemented. Management of the Upshur County Board of Education should follow the guidance set forth in Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Board has developed procedures to ensure that all purchased orders are approved before orders are placed, all expenditures are properly authorized by the respective program director and supporting documentation is adequately maintained. The Board is using a requisition form in Droplet to achieve this goal. All employees authorized to make or approve purchases have been trained on purchasing procedures outlined in the Purchasing Policies and Procedures and Procedures Manual for Local Educational Agencies in the State of West Virginia by the WVDE Office of School Finance on 2/23/2024.
Grant Title: Title I Grants to Local Educational Agencies (Title I) Federal Award Number and Year: 2023 Assistance Listing #: 84.010A Federal Agency: US Department of Education Pass-through Entity number: 41 Pass-through Agency: WV Department of Education Grant Title: Supporting Effective Instruction State Grants (Title II) Federal Award Number and Year: 2023 Assistance Listing #: 84.367 and 84.367A Federal Agency: US Department of Education Pass-through Entity number: 40 Pass-through Agency: WV Department of Education Grant Title: COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund - Education Stabilization Fund (ESSER) Federal Award Number and Year: 2023 Assistance Listing #: 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52 Pass-through Agency: WV Department of Education CONDITION: Several expenditures were not properly approved by the Federal Program Directors. In addition, signed purchase orders or other supporting documentation were not available for all expenditures. Management did not ensure that expenditures were allowable for the Title I, Title II, and ESSER programs. CONTEXT: Specifically, we identified the following: Sixty non-payroll expenditure transactions were sampled from a population of 204 for Title I Grants to Local Education Agencies, of which Fifty-seven expenditures, or 95% of the sample size, totaling $208,000, did not have Program Director approval prior to payment. Fourteen expenditures, or 23% of the sample size, totaling $144,290, in which the contract was not available for review for contracted services. Twenty-three expenditures, or 38% of the sample size, totaling $30,152, in which purchase orders were not signed. One expenditure, or 2% of the sample size, totaling $2,783, in which an itemized invoice was not available for review. Three expenditures, or 5% of the sample size, totaling $8,003, in which the expenditure was not properly coded. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Eleven expenditures, or 18% of the sample size, totaling $25,811, in which the purchase order was dated after the invoice. In addition, one expenditure was $120 more than the approved purchase order. One expenditure, or 2% of the sample size, totaling $23, in which State sales tax was paid. Twenty-three expenditures, or 38% of the sample size, totaling $25,989, which were not supported with adequate documentation. Nine non-payroll expenditures were sampled from a population of 53 for the Supporting Effective Instruction State Grants program (Title II), of which Three expenditures, or 33% of the sample size, totaling $2,827, did not have Program Director approval prior to payment. Four expenditures, or 44% of the sample size, totaling $6,545, in which the purchase order was not signed. Two expenditures, or 22% of the sample size, totaling $3,195, in which the purchase order was dated after the invoice. Sixty non-payroll expenditure transactions were sampled from a population of 93 for the COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief (ESSER) Fund - Education Stabilization Fund, of which Fifty-four expenditures, or 90% of the sample size, totaling $3,136,290, did not have Program Director approval prior to payment. One expenditure, or 2% of the sample size, totaling $27,665, in which the expenditure was not properly coded. Nineteen expenditures, or 32% of the sample size, totaling $176,763, in which the contract was not available for review for contracted services. Twenty-one expenditures, or 35% of the sample size, totaling $814,912, in which the purchase order was not signed. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Twenty-four expenditures, or 40% of the sample size, totaling $940,689, in which the purchase order was dated after the invoice. In addition, one expenditure was $12,000 more than the approved purchase order. Sixteen expenditures, totaling $81,698, that did not have any bid documentation available for review. Ten expenditures, totaling $143,731, were not included in the approved ESSER budget. Six expenditures, totaling $118,731, in which ESSER funds were used to match other federal funds. Three expenditures, totaling $32,460, for activities such as passes or tickets where there was no support to indicate who received the passes or tickets. The final cost of a construction project was $81,589 more than the original bid and also exceeded the next two highest original bids with no documentation available for review regarding change orders or approvals thereof. The Board allowed a construction project to begin knowing that there was a deficit of $107,246 and no known available funding to complete the project. In addition, we tested 20 personnel files and related payroll expenditures for the above federal programs and noted the following items: One employee was overpaid $1,775 for supplemental duties based on support available for review. Six employees did not have a proper verification of education in their file. Five employees did not have a valid employment contract in their file. Four employees were paid supplements, totaling $55,351, and did not have support in their file. Five employees did not have a valid extra-duty employment contract in their file. Four employees did not have an IRS W-4 withholding form. Ten employees did not have a WV IT-104 withholding form. Twenty employees did not have voluntary withholding forms available for review. CRITERIA: Proper internal controls include maintaining an adequate filing system in order to safeguard records and documents and procedures that ensure all purchases are approved by reconciling a purchase order to the invoice from the vendor prior to payment. Additionally, Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.334 states, in part, that: "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." Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.403 states, in part, that: "Except where otherwise authorized by statue, costs must meet the following general criteria in order to be allowable under Federal Awards: ...(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period... (g) Be adequately documented." Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Subpart E §75.604 states, in part, that: "A grantee shall ensure that sufficient funds are available to meet any non-Federal share of the cost of constructing the facility." QUESTIONED COSTS: Unknown. CAUSE: Procedures were not in place to ensure that invoices and supporting documentation were maintained for all expenditures and that each expenditure was properly approved. Management of the Board does not have controls in place to comply with the Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. EFFECT: Certain funds were not expended in accordance with requirements of their respective programs, and auditors were unable to determine the allowability of expenditures due to inadequate documentation. This issue contributed to the disclaimer of opinion on compliance for the Title I, Title II, and ESSER Programs. REPEAT FINDING: No RECOMMENDATION: Board officials should establish and follow procedures to require: All purchase orders be issued prior to the purchase and receipt of the invoice, All expenditures be no greater than the remaining amount on their corresponding blanket purchase orders, Each expenditure be coded in accordance with the Board of Education's chart of accounts, Contracts for contracted services be available for review, and All personnel files be complete and have adequate support for payroll expenditures. The officials of the Upshur County Board of Education should review the existing procedures and controls over federal award expenditures to determine that these controls are implemented, and working effectively to ensure that expenditures are properly authorized prior to payment. Board officials should ensure that all expenditures are properly authorized by the respective program directors. The Board officials should consider additional training, internal reviews, cross-training of employees, and other measures as deemed appropriate to ensure existing controls are implemented. Management of the Upshur County Board of Education should follow the guidance set forth in Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Board has developed procedures to ensure that all purchased orders are approved before orders are placed, all expenditures are properly authorized by the respective program director and supporting documentation is adequately maintained. The Board is using a requisition form in Droplet to achieve this goal. All employees authorized to make or approve purchases have been trained on purchasing procedures outlined in the Purchasing Policies and Procedures and Procedures Manual for Local Educational Agencies in the State of West Virginia by the WVDE Office of School Finance on 2/23/2024.
Grant Title: Title I Grants to Local Educational Agencies (Title I) Federal Award Number and Year: 2023 Assistance Listing #: 84.010A Federal Agency: US Department of Education Pass-through Entity number: 41 Pass-through Agency: WV Department of Education Grant Title: Supporting Effective Instruction State Grants (Title II) Federal Award Number and Year: 2023 Assistance Listing #: 84.367 and 84.367A Federal Agency: US Department of Education Pass-through Entity number: 40 Pass-through Agency: WV Department of Education Grant Title: COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund - Education Stabilization Fund (ESSER) Federal Award Number and Year: 2023 Assistance Listing #: 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52 Pass-through Agency: WV Department of Education CONDITION: Several expenditures were not properly approved by the Federal Program Directors. In addition, signed purchase orders or other supporting documentation were not available for all expenditures. Management did not ensure that expenditures were allowable for the Title I, Title II, and ESSER programs. CONTEXT: Specifically, we identified the following: Sixty non-payroll expenditure transactions were sampled from a population of 204 for Title I Grants to Local Education Agencies, of which Fifty-seven expenditures, or 95% of the sample size, totaling $208,000, did not have Program Director approval prior to payment. Fourteen expenditures, or 23% of the sample size, totaling $144,290, in which the contract was not available for review for contracted services. Twenty-three expenditures, or 38% of the sample size, totaling $30,152, in which purchase orders were not signed. One expenditure, or 2% of the sample size, totaling $2,783, in which an itemized invoice was not available for review. Three expenditures, or 5% of the sample size, totaling $8,003, in which the expenditure was not properly coded. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Eleven expenditures, or 18% of the sample size, totaling $25,811, in which the purchase order was dated after the invoice. In addition, one expenditure was $120 more than the approved purchase order. One expenditure, or 2% of the sample size, totaling $23, in which State sales tax was paid. Twenty-three expenditures, or 38% of the sample size, totaling $25,989, which were not supported with adequate documentation. Nine non-payroll expenditures were sampled from a population of 53 for the Supporting Effective Instruction State Grants program (Title II), of which Three expenditures, or 33% of the sample size, totaling $2,827, did not have Program Director approval prior to payment. Four expenditures, or 44% of the sample size, totaling $6,545, in which the purchase order was not signed. Two expenditures, or 22% of the sample size, totaling $3,195, in which the purchase order was dated after the invoice. Sixty non-payroll expenditure transactions were sampled from a population of 93 for the COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief (ESSER) Fund - Education Stabilization Fund, of which Fifty-four expenditures, or 90% of the sample size, totaling $3,136,290, did not have Program Director approval prior to payment. One expenditure, or 2% of the sample size, totaling $27,665, in which the expenditure was not properly coded. Nineteen expenditures, or 32% of the sample size, totaling $176,763, in which the contract was not available for review for contracted services. Twenty-one expenditures, or 35% of the sample size, totaling $814,912, in which the purchase order was not signed. One expenditure, or 2% of the sample size, totaling $6,485, in which the invoice was not itemized. Twenty-four expenditures, or 40% of the sample size, totaling $940,689, in which the purchase order was dated after the invoice. In addition, one expenditure was $12,000 more than the approved purchase order. Sixteen expenditures, totaling $81,698, that did not have any bid documentation available for review. Ten expenditures, totaling $143,731, were not included in the approved ESSER budget. Six expenditures, totaling $118,731, in which ESSER funds were used to match other federal funds. Three expenditures, totaling $32,460, for activities such as passes or tickets where there was no support to indicate who received the passes or tickets. The final cost of a construction project was $81,589 more than the original bid and also exceeded the next two highest original bids with no documentation available for review regarding change orders or approvals thereof. The Board allowed a construction project to begin knowing that there was a deficit of $107,246 and no known available funding to complete the project. In addition, we tested 20 personnel files and related payroll expenditures for the above federal programs and noted the following items: One employee was overpaid $1,775 for supplemental duties based on support available for review. Six employees did not have a proper verification of education in their file. Five employees did not have a valid employment contract in their file. Four employees were paid supplements, totaling $55,351, and did not have support in their file. Five employees did not have a valid extra-duty employment contract in their file. Four employees did not have an IRS W-4 withholding form. Ten employees did not have a WV IT-104 withholding form. Twenty employees did not have voluntary withholding forms available for review. CRITERIA: Proper internal controls include maintaining an adequate filing system in order to safeguard records and documents and procedures that ensure all purchases are approved by reconciling a purchase order to the invoice from the vendor prior to payment. Additionally, Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.334 states, in part, that: "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." Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.403 states, in part, that: "Except where otherwise authorized by statue, costs must meet the following general criteria in order to be allowable under Federal Awards: ...(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period... (g) Be adequately documented." Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Subpart E §75.604 states, in part, that: "A grantee shall ensure that sufficient funds are available to meet any non-Federal share of the cost of constructing the facility." QUESTIONED COSTS: Unknown. CAUSE: Procedures were not in place to ensure that invoices and supporting documentation were maintained for all expenditures and that each expenditure was properly approved. Management of the Board does not have controls in place to comply with the Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. EFFECT: Certain funds were not expended in accordance with requirements of their respective programs, and auditors were unable to determine the allowability of expenditures due to inadequate documentation. This issue contributed to the disclaimer of opinion on compliance for the Title I, Title II, and ESSER Programs. REPEAT FINDING: No RECOMMENDATION: Board officials should establish and follow procedures to require: All purchase orders be issued prior to the purchase and receipt of the invoice, All expenditures be no greater than the remaining amount on their corresponding blanket purchase orders, Each expenditure be coded in accordance with the Board of Education's chart of accounts, Contracts for contracted services be available for review, and All personnel files be complete and have adequate support for payroll expenditures. The officials of the Upshur County Board of Education should review the existing procedures and controls over federal award expenditures to determine that these controls are implemented, and working effectively to ensure that expenditures are properly authorized prior to payment. Board officials should ensure that all expenditures are properly authorized by the respective program directors. The Board officials should consider additional training, internal reviews, cross-training of employees, and other measures as deemed appropriate to ensure existing controls are implemented. Management of the Upshur County Board of Education should follow the guidance set forth in Title 2 U.S. Code of Federal Regulations (CFR) Part 200 and Title 34 U.S. Code of Federal Regulations (CFR) Part 75. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Board has developed procedures to ensure that all purchased orders are approved before orders are placed, all expenditures are properly authorized by the respective program director and supporting documentation is adequately maintained. The Board is using a requisition form in Droplet to achieve this goal. All employees authorized to make or approve purchases have been trained on purchasing procedures outlined in the Purchasing Policies and Procedures and Procedures Manual for Local Educational Agencies in the State of West Virginia by the WVDE Office of School Finance on 2/23/2024.
Condition – During the fiscal year ended June 30, 2023, Saint Agnes Medical Center Fresno (“Fresno”) was granted multiple project fundings under the Federal Emergency Management Agency’s (FEMA) Public Assistance grant program in response to the COVID-19 public health emergency. A total of $7,336,096 of FEMA assistance payments were received from the pass-through entity, California Governor's Office of Emergency Services. The eligible expenses that were obligated and disbursed for FEMA funding were incurred between March 20, 2020 and July 31, 2022, during which some of the expenses were also eligible for and reimbursed by another federal source of funding (COVID-19 Provider Relief Fund and American Rescue Plan – “PRF”). It was discovered that a total of $670,625 COVID-19 eligible expenses (i.e., occupancy and supplies) that were reimbursed by PRF were duplicative of those reported as project obligations to FEMA. Criteria – According to § 200.403(f) of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, “allowable costs must not be included as a cost of any other federally financed program in either the current or a prior period”. Cause – Prior to submitting the project applications to FEMA, the Fresno accounting department aggregated the total amount of eligible expenses available to be used for both the FEMA and PRF programs and determined that there were more expenses than the total award amounts for both programs. However, they did not review expenses by category and did not identify that expenses reported in the PRF portal filings in the occupancy and expense categories when combined with occupancy and supplies expenses reported for FEMA resulted in duplicative submission of some expenses. Effect – Fresno included certain occupancy and supplies expenses in both the PRF portal filing and the FEMA project application. Questioned costs – $670,625* **The amount is a questioned cost because there is no mechanism to correct the PRF portal filing to change the categories of expenses to reduce the occupancy and supplies category and increase another category for allowable expenses that have not yet been applied to PRF or FEMA grants. While the amount reported in the PRF portal for the categories of occupancy and supplies expense was overstated because certain costs were applied to FEMA awards, the total amount of expenses reported in the PRF portal requires no revision. Context – The Corporation included $670,625 out of $7,336,096 of expenses that were previously included in a PRF portal filing under the occupancy and supplies category. Fresno has $2,035,190 of additional PRF eligible expenses in other categories that have not been reimbursed by any other grant programs. Repeat Finding from Prior Year – No Recommendation – The Corporation should not only look at total expenses that are allowable for use under multiple federal sources of funding, but should also review the expenses at a detailed level to ensure that individual expenses are not double counted.
Finding 2023-004 – Coronavirus State and Local Fiscal Recovery Funds – Allowable Cost/Cost Principles Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing No.: 21.027 Federal Agency: U.S. Department of the Treasury Passed Through: N/A – Direct Program Award Year: Fiscal Year 2022-2023 Compliance Requirement: Allowable Cost/Cost Principles Questioned Costs: $1,734,018 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.403 states that, except where otherwise authorized by stature, in order to be allowable under Federal awards, costs must be incurred during the approved budget period. Condition During our testing of expenditures charged to the program, we identified $1,734,018 in questioned costs related to cybersecurity improvements recorded during the audit period ending June 30, 2023. Our procedures revealed that these costs were actually incurred outside the audit period, with evidence indicating dates after June 30, 2023. Cause of Condition The County’s existing internal control system is not operating effectively to provide reasonable assurance that charges to the program are allowable. Repeat Finding Yes. See prior year finding 2022-002. Effect of Condition The County is not in compliance with the allowable cost/cost principles requirements under the Uniform Guidance. Recommendation Management should review the identified transactions and reclassify them to the appropriate period. Additionally, management should strengthen internal controls to ensure that only allowable costs incurred by the County’s fiscal year end period are charged to the program. This may include procedures for reviewing invoices and approving expenditures to verify the date the cost was incurred. For ongoing Department claims, management should ensure that proper documentation exists for each expenditure, including receipts, invoices, and proof of payment prior to processing. Management Response and Corrective Action Plan The County agrees with the finding. The County processed a transfer of revenues to ISD in anticipation of the expenses to be incurred for cybersecurity improvements in FY 2022-2023; however, the fund was not fully spent. The Auditor-Controller’s office will work with the CAO’s office to review and address the inefficiencies in the County’s internal control system. We will review the identified transactions and will work with ISD to reclassify the identified expenditures to the appropriate period. Going forward, the County will ensure that proper documentation, such as receipts, invoices, and proof of payments, are received from departments prior to processing. This implementation will be effective immediately.
(2023-030) Title: Internal control over P-EBT Food Benefits needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Pandemic EBT Food Benefits (P-EBT) (COVID-19) Assistance Listing Number: 10.542 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $4,271 Likely Questioned Costs: $4,862,998; likely questioned costs were projected by dividing the known questioned costs in the sample by total Pandemic Electronic Benefit Transfer (P-EBT) benefits tested to establish an error rate, then applying that error rate to total P-EBT benefits issued in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 274.5; Families First Coronavirus Response Act (Public Law 116-127), Section 1101; State Plan for Pandemic EBT: Children in School/Child Care 2021-2022; State Plan for Pandemic EBT: Children in School and Child Care, Summer 2022 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The State is required to maintain EBT issuance, inventory, reconciliation, and other accountability records for a period of three years. The State agency shall control all issuance documents which establish household eligibility while the documents are transferred and processed within the State. The State agency shall use numbers, batching, inventory control logs, or similar controls from the point of initial receipt through the issuance and reconciliation process. The Department must carry out the P-EBT program, authorized by the Families First Coronavirus Response Act (FFCRA), in accordance with the State agency plans approved by the U.S. Department of Agriculture (USDA). FFCRA allows the Department of Education (DOE) to release necessary student information to the Office for Family Independence (OFI) regarding participation in the National School Lunch Program and School Breakfast Program for purposes of administering the P-EBT program. The State was required to submit plans to USDA as a precondition for participation in the P-EBT program. The plans outline the proposed framework for operating the program including details on how benefits will be issued, estimates for the total amount of P-EBT benefits and the number of children participating, tentative issuance schedules, and how the State will identify eligible school children and children in child care. Two separate plans were approved by USDA for P-EBT benefit issuances during fiscal year 2023: School Year 2021-2022 and Summer 2022. Condition: FFCRA authorized the establishment of the P-EBT Food Benefits program in response to the COVID-19 public health emergency. The P-EBT program is administered by OFI, with support from DOE, and provides nutrition assistance for school-age children who would have received free or reduced price school meals under the National School Lunch Program and School Breakfast Program, and children in child care whose child-care facility was closed or had reduced attendance or hours due to COVID-19. As outlined in the State’s USDA-approved plans, OFI established an agreement with DOE to provide information required for issuance of P-EBT benefits to eligible children. DOE provided student data as a starting point for eligibility determinations under the P-EBT program. OFI utilized this information to apply additional eligibility criteria, add information for children under six, calculate appropriate P-EBT benefits, and build benefit issuance files for processing. The State plans and underlying agreement between OFI and DOE establish OFI as the responsible party for the maintenance of data used for determining client eligibility and distributing benefits. Federal guidance over the P-EBT program outlines that audit procedures provide assurance that the Department has established and implemented processes to properly determine program eligibility and benefit levels. The Office of the State Auditor (OSA) reviewed policies and procedures related to OFI’s issuance of P-EBT benefits, and identified the following: • OFI does not have policies and procedures in place to require performance of an independent review, reconciliation, or verification of data provided by DOE to ensure all eligibility criteria are met prior to issuance of P-EBT benefits. A reliance is placed on algorithms within DOE’s data extracts to ensure compliance with eligibility requirements outlined in the State’s approved plan. • OFI does not have documented policies and procedures in place for the data cleaning process applied to files received from DOE. OFI conducts data cleaning on all data files provided by DOE before issuing P-EBT benefits. The cleaning process includes changes such as reformatting zip codes or invalid field lengths, and modifications for inconsistent dates, invalid characters, duplicated data, and invalid address data. Documentation of changes made as a result of the cleaning process is not retained by the Department. • OFI does not have documented policies and procedures in place for system integration testing (SIT) and user acceptance testing (UAT) of P-EBT issuance files. The files built by OFI undergo SIT and UAT prior to transmission for benefit issuance, which includes running a test upload of benefit issuance files and comparing the data input to the resulting output and reviewing a sample of individual benefit issuances. Because documented policies and procedures do not exist, the format, documentation, and results of these testing processes are inconsistent. OSA requested original data files containing client and benefit issuance information utilized by OFI during fiscal year 2023 for all P-EBT issuances that occurred to verify consistency with the State’s USDA-approved plans and compliance with Federal requirements. OSA tested P-EBT benefits provided to 60 households during the fiscal year; however, some households had multiple students receiving benefits. This resulted in a test of 76 P-EBT benefit issuances which identified the following: • For 22 students that received school year P-EBT benefits, OSA was unable to verify eligibility criteria relating to school status, resulting in overpayments totaling $1,534. • For four students that received school year P-EBT benefits, OSA was unable to verify eligibility criteria for free or reduced-price school meals, resulting in overpayments totaling $1,564. • For three students that received summer P-EBT benefits, OSA was unable to confirm the students’ enrollment in school in June 2022, resulting in overpayments totaling $1,173. OFI did not maintain adequate documentation in support of these P-EBT benefit payments totaling $4,271, as required by the agreement between OFI and DOE, and as outlined in the approved State plans. OSA selected a non-statistical random sample. In addition, it was noted through audit testing that OFI does not consistently utilize identification numbers for benefit issuance tracking. P-EBT benefits were issued to existing household EBT cards, under pandemic-related identification numbers, and under child identification numbers; however, the documentation maintained for P-EBT benefit issuances is only tracked by child identification number. This results in an inability to properly monitor benefit issuances to ensure that P-EBT benefits are not duplicated. Context: In fiscal year 2023, the State provided approximately 104,000 P-EBT clients with $37.9 million in Federal benefits. OSA identified 29 unsupported P-EBT benefit issuances out of 76 benefit issuances tested, which represents an error rate of approximately 38 percent. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department establish policies and procedures to ensure that: • OFI reviews and reconciles data received from DOE to support eligibility determinations prior to P-EBT benefit issuance; • the data cleaning, SIT, and UAT processes are documented and consistent; and • all documentation in support of P-EBT eligibility determinations and allowability of resulting benefit issuances can be provided in accordance with Federal regulations. In addition, we recommend that the Department review all benefit issuances noted in the Condition of this finding to ensure that unallowable costs are identified and reported to USDA. Corrective Action Plan: See F-17 Management’s Response: The Department partially agrees with this finding. The Department agrees three students that received summer P-EBT benefits were overpaid $391 each. The Department disagrees with the following Conditions: For 22 students, MDOE was not able to identify the specific student whose continuous absence established those students’ schools’ eligibility date. The P-EBT state plan required at least one student to be absent or remote for at least five consecutive days to establish a school eligibility date and MDOE in fact applied this test and established a school eligibility start date at the time the eligibility files were generated. While the school eligibility start date was captured and preserved in the original files provided to OSA, no student was named. The name of the student was not relevant to other students’ eligibility, and creating or preserving a record of the particular student whose absence conferred eligibility was not a requirement of Maine’s P-EBT plan with FNS, the Department’s MOU with MDOE, or federal P-EBT policy. Further attaching that kind of Personal Identifying Information (PII) to other students’ records would not be appropriate. Additionally, since local educational agencies (LEAs) update the core database throughout the school year and beyond, the results could not be replicated in the course of this audit to retrospectively identify the particular students whose absences conferred eligibility. Neither the omission of the students’ names in the original file nor DOE’s inability to identify such students during the audit establishes that it was improper to issue P-EBT benefits in connection with those students. These students were found eligible based on the best data available to MDOE at the time. Likewise, the Department acknowledges that for four students, MDOE was unable – when requested to do so by the OSA – to locate their economically disadvantaged status in the database updated by LEAs throughout the school year. That does not mean, however, that it was improper to issue P-EBT benefits in connection with those students. These students’ economically disadvantaged status was verified by MDOE and captured in the files at the time of issuance. The Department disagrees that tracking benefit issuance by child identification number is inadequate to monitor benefit issuances and ensure benefits are not duplicated. Child identification numbers are the most reliable way to track and deduplicate issuance. As pointed out in this finding, many households had more than one child. Additionally, some children may have moved from one household to another during the period in question. The Department disagrees with the Context and Likely Questioned Costs: For the reasons detailed above, only three – not 29 – of the students sampled were established to have been issued benefits in error. OSA’s calculations should be adjusted accordingly. The Department disagrees with the Causes: OSA is incorrect to conclude that OFI should have reviewed, reconciled, and verified data provided by MDOE prior to issuance for at least two reasons. First, contrary to OSA’s characterization of the partnership, the Department and MDOE were jointly responsible for administering the P-EBT program, with delegated duties defined in the state plan. That federally approved plan considered MDOE data to be accurate and actionable, and it did not contemplate OFI independently validating such data. Second, the Department is not permitted access to the local educational agency data that would have been necessary for the type of review and reconciliation proposed. The Department disagrees with the Recommendations: The three bulleted recommendations cannot be implemented. The P-EBT program ended December 31, 2023. It will not be possible to take corrective action in the implementation of a program that no longer exists. The State is confident that all issuances in the audit period, including those raised by OSA, were issued correctly based on the best information available at the time by the Departments responsible for implementing the P-EBT program. As such and following FNS guidance that no benefits are to be recouped unless the household applied for them directly, OFI will not revisit prior P-EBT decisions as suggested in OSA’s additional recommendation. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The relationship between OFI and DOE in administering the P-EBT program is outlined in the USDA-approved State plans and the documented agreement in place between the Departments. The agreement states that its purpose is to document the terms and conditions under which DOE will disclose to OFI the education records containing student data. It does not place burden on DOE for administration of the P-EBT program. OFI agreed to “establish procedures and systems to ensure that all confidential data processed, stored, and/or transmitted […] will be maintained in a secure manner” and agreed to “maintain this data as other data used for determining client eligibility and distribution of benefits.” OSA provides the following responses to OFI’s disagreements with the exceptions noted in the Condition of the finding: • For the 22 students where eligibility criteria relating to school status could not be verified, OSA recognizes that DOE data is continually updated throughout the year; however, as outlined in the agreement with DOE, OFI is responsible for maintaining data provided by DOE as P-EBT program data used for determining client eligibility and distribution of benefits. • For the four students where eligibility criteria for free or reduced-price school meals could not be verified, documentation in support of program eligibility and allowability was not maintained by OFI as agreed to by both Departments. Furthermore, 2 CFR 200.403 requires Federal program costs to be adequately documented, including maintenance of records sufficient to determine that such funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. OFI did not maintain sufficient documentation to support P-EBT program eligibility and allowability. Contrary to OFI’s contention, it is not DOE’s inability to regenerate and provide data that results in a 38 percent error rate and questioned costs. Rather, it is the negligence of OFI, as the administering agency, to maintain and provide original documentation in support of P-EBT eligibility and benefit issuances. OFI confirms in their response that they failed to maintain such documentation. Without documentation and evidence to substantiate that the P-EBT benefits issued in connection with those students are in line with P-EBT program eligibility requirements, OSA cannot determine that the benefits are allowable; therefore, OSA continues to question the allowability of these costs. In response to OFI’s disagreement surrounding tracking benefit issuance by child identification number, OFI is misconstruing the reported Condition. OSA agrees with OFI’s statement that child identification numbers are the most reliable way to track and deduplicate benefit issuance; however, as stated in the Condition, OFI issued benefits under a variety of identification numbers. As a result, OFI does not have the ability to properly monitor benefit issuances to ensure that P-EBT benefits are not duplicated. In response to OFI’s disagreement that review, reconciliation, and verification of DOE data should be performed prior to benefit issuance, including OFI’s assertion that access to data that would have been necessary for the type of review and reconciliation proposed is not permitted, the USDA-approved State plan for school year P-EBT benefits outlines that: • DOE will provide OFI with every student’s specific daily learning model and absence status that is eligible for free or reduced-price school meals. OFI will identify students that have excused absences for five consecutive days or more and issue the appropriate P-EBT benefit. • DOE will provide OFI with a list of all students eligible for free or reduced-price school meals for use in a reconciliation process. • Utilizing the data provided by DOE, OFI will verify that students were eligible for free or reduced-price school meals and the absence status the school reported for the child and resolve any discrepancies when processing reconciliation applications. The State plan, FFCRA, and the Departments’ agreement in place allows OFI to receive and access the data that would have been necessary for review, reconciliation, and verification of DOE data and resulting P-EBT eligibility. Existing policies and procedures do not adhere to the terms of the State plan as submitted to and approved by USDA. While OFI is confident that all issuances in the audit period were issued correctly based on the best information available at the time, documentation in support of this assertion was not maintained. The State plan further outlines that OFI “commits to reporting all identified over issuances […] including the number of children affected, the dollar value and the nature of the error. Maine will have the ability to track any detected over issuance of P-EBT benefits. This data will be available in report form for analysis to determine if a claim will be established and pursued.” FNS guidance that states no benefits are to be recouped unless the household applied for them directly does not preclude OFI from taking action to identify and report over issuances to Federal oversight. The finding remains as stated. (State Number: 23-1108-05)
(2023-031) Title: Internal control over SNAP eligibility determinations and benefit calculations needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $7,491 Likely Questioned Costs: Undeterminable; incorrectly calculated Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to clients. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.1 and .10; Families First Coronavirus Response Act (Public Law 116-127), Section 2302 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. Individuals or a group of individuals paying a reasonable amount for meals or meals and lodging must be considered boarders and are not eligible to participate in SNAP independently of the household providing the board. State agencies must calculate a household’s expenses based on the expenses the household expects to be billed for during the certification period (12 months). The Families First Coronavirus Response Act (FFCRA) established emergency allotments for households participating in SNAP to provide temporary food needs at the applicable maximum allotment for the household size. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all casefile information necessary to properly process eligibility determinations and benefit calculations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations and related benefit calculations. The Office of the State Auditor (OSA) tested 60 household monthly benefit payments to verify the accuracy of SNAP operations utilizing ACES, and identified the following: • Three underpayments of monthly SNAP benefits totaling $1,242 due to errors by Department personnel while processing manual ACES case file modifications to income information • Four overpayments of monthly SNAP benefits, including: o one benefit overpayment totaling $918 due to income information not updated by the Department in the ACES case file in a timely manner o two benefit overpayments totaling $2,974; an income data exchange with ACES appropriately adjusted income information to the correct prior date in each case file; however, previously issued monthly benefit payments were not recalculated and recovered from households accordingly. o one benefit overpayment totaling $3,599; the client should have been classified as a “boarder” within the household, and therefore, ineligible to participate in SNAP independently of the household providing the board. • One case was identified where household expenses from which benefit amounts were calculated had not been updated since 2018. The Department did not calculate the household’s benefit allotment based on expected annual expenses, in line with the 12-month redetermination period required by SNAP program regulations. The client was paid an accurate total monthly benefit due to the emergency allotment from FFCRA, which provided the maximum benefit amount for this case. OSA selected a non-statistical random sample. The Department does not have adequate policies and procedures in place to ensure that ACES case file modifications, whether manual or system interfaced, that result in adjustments to previously issued monthly SNAP benefits are appropriately processed. This includes a recalculation of previously issued benefits when case file modifications are processed, establishment of corresponding overpayments or underpayments, and related follow-up actions with households. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits may be incorrectly calculated, resulting in households being underpaid and/or overpaid. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement additional policies and procedures to ensure that: • case information entered into ACES is accurate; • automated eligibility determinations and benefit calculations are processed in accordance with Federal regulations; and • recalculations of previously issued benefits and related follow-up actions occur when case file modifications are retroactive. Corrective Action Plan: See F-19 Management’s Response: The Department partially agrees with the exceptions noted; however, the Office for Family Independence has policies in place to ensure that information that is entered into ACES is accurate, that automated client eligibility determinations are processed in accordance with federal law and that recalculations of file modifications are retroactive, as applicable. The Department will continue to review its operating procedures to identify opportunities for improvement. Regarding the one case identified where household expenses had not been updated since 2018: The Head of Household (HH) has been receiving the full standard (FSUA) which means the expense deduction has been changing. The client & Department have been updating the medical expense deduction with timely verifications from the client. On the signed Review, the client checked that the above listed expenses were correct and checked the HH had no other shelter expenses other than the ones listed above. These actions are in compliance with 7 CFR 273.10(d)(4). The Department asserts that adequate safeguards are in place. The cost of implementing the recommendations would exceed the benefit realized in achieving 100 percent accuracy in determining eligibility. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: Regarding the one case noted in Management’s Response, the ACES case file does note changes in household medical expenses and Full Standard Utility Allowance (FSUA) values, including confirmation that the expenses were accurate during the household’s most recent annual recertification; however, the household’s monthly rent expense has been documented as “anticipated” and has not changed since 2018. The expenses have never been verified. 7 CFR 273.10 requires anticipated expenses to be based on the most recent month’s bills. At the time of audit testing, the expense information remained unchanged and unverified for approximately five years. For the seven exceptions identified which were not addressed in Management’s Response, existing policies and procedures resulted in inaccurate benefit payments. OSA recognizes that achieving 100 percent accuracy in determining eligibility and calculating benefit payments would likely not be feasible; however, a sample payment error rate of approximately 12 percent indicates that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 23-1108-02)
(2023-032) Title: Internal control over Medicaid and SNAP deceased client cases needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture U.S. Department of Health and Human Services Assistance Listing Title: SNAP Cluster (COVID-19) Medicaid Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561; 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $8,329 (ALN 10.551) Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) tested a sample of cases where Supplemental Nutrition Assistance Program (SNAP) benefits were issued after the client’s date of death (DOD). Issuance of benefits to a deceased client does not necessarily result in unallowable program costs, as the issued benefits may not be expended; therefore, an error rate cannot be applied to the population and a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.8 and .14 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. State agency action on information items about recipient households shall include review of information and comparison of it to case record information. State agencies must initiate and pursue actions on recipient households within 45 days of the receipt of the information items. States shall establish a system to verify and ensure that benefits are not issued to individuals who are deceased. States shall use the Social Security Administration’s (SSA) Death Master File, obtained through the State Verification and Exchange System. Condition: The Office for Family Independence (OFI) manages the Automated Client Eligibility System (ACES) that is used to determine eligibility for Federal assistance programs, including Medicaid and SNAP. Information maintained in ACES is relied upon by OFI for determining monthly SNAP benefits issued to client Electronic Benefit Transaction (EBT) cards, and by the Office of MaineCare Services for processing Medicaid claims. OFI relies on numerous data sources for identifying and providing client DOD information for input into ACES, including monthly data exchanges with the Maine Center for Disease Control & Prevention (MeCDC) Vital Records and weekly data reports from the SSA’s Death Master File. Federal program regulations require OFI to act on client cases within 45 days of receipt of DOD information. This includes review and comparison of DOD information to ACES case file information, and suspension of program participation and related benefits as warranted. OFI policies for SNAP require deactivation of the client’s EBT card as well as expungement of authorized benefits from the EBT card. If activity occurred on the client’s EBT card subsequent to the DOD, the case must be reported as potential fraud and referred for investigation. The Office of the State Auditor (OSA) obtained DOD information from MeCDC Vital Records and compared it to clients who received Medicaid and SNAP benefits during fiscal year 2023. OSA identified 95 Medicaid claims with service dates after DOD in fiscal year 2023 and reviewed 30 clients with the largest paid claim amounts. Because certain Medicaid claims with service dates after DOD are considered allowable, claims paid on behalf of the deceased clients noted below are not reported as questioned costs: • Two clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. • Two clients did not have a DOD recorded in ACES but were reported as deceased by MeCDC Vital Records. Furthermore, four Medicaid clients with an incorrect DOD identified by OSA during the fiscal year 2022 audit were still not corrected in ACES. OSA identified 671 cases where SNAP benefits were issued more than 52 days following the client’s DOD; this benchmark was applied to denote the 45-day Federal program regulation related to weekly receipt of DOD information. OSA tested 60 of these SNAP cases and identified the following: • 18 single member household clients had EBT card purchase activity after DOD. Of these 18 clients: o 14 clients had transaction activity after DOD that occurred in fiscal year 2023, resulting in unallowable costs totaling $8,329, as follows: • For 13 of the 14 clients, unauthorized transaction activity totaling $7,297 occurred between the actual DOD and the Department’s receipt and processing of the DOD information in ACES. • One of the 14 clients did not have a DOD recorded in their ACES case file at the time of audit testing but was reported as deceased by MeCDC Vital Records; this resulted in $1,032 of unauthorized transaction activity. o Four clients’ DOD occurred in fiscal year 2023 and benefits continued to be authorized and issued; however, the unallowable purchase activity began subsequent to fiscal year 2023. o Four clients were not identified as potential fraud in the ACES case file. As a result, they were not referred for investigation as required by OFI policies. • Five clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. This resulted from the Department’s practice of entering DODs as the last day of the month or an alternative date from public information sources in order to suspend benefits in cases where DOD information is not immediately available; however, the Department had MeCDC Vital Records information at the time of DOD input for all five clients and should have entered DODs based on those records. • One client did not have a DOD recorded in their ACES case file but was reported as deceased by MeCDC Vital Records; benefits were authorized during fiscal year 2023, but no unauthorized transaction activity occurred. • 10 clients’ benefits were not expunged upon receipt of DOD information as required by OFI policies; benefits were only expunged by the system-automated process based on inactivity after 274 days. For 2 of the 10 clients, the EBT card was never deactivated; therefore, benefits remained open and available for use 274 days after DOD. • One client’s case remained open two months after OFI was notified of the client’s DOD, resulting in two months of unauthorized SNAP benefit issuances. • Two clients’ ACES case file information partially matched DOD information from MeCDC Vital Records, including names and dates of birth; however, the client social security numbers did not match. The Department did not review the cases to determine appropriate follow-up action. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately: • 575,000 Medicaid clients with $2.5 billion in Federal benefits. Of the 575,000 Medicaid clients, 9,826 had a DOD in fiscal year 2023. • 127,000 SNAP clients with $484.8 million in Federal benefits. Of the 127,000 SNAP clients, 2,021 had a DOD in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Medicaid claims paid on behalf of deceased clients may go undetected. • SNAP benefits issued to deceased clients may result in unauthorized EBT card purchase activity. • Known questioned costs for SNAP • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that DOD information is received, reviewed, and updated in ACES on a more frequent basis to prevent unallowable Medicaid claim payments, and unauthorized SNAP benefit issuances and EBT card purchase activity. In addition, we recommend that the Department review all client cases noted in the Condition of this finding to ensure that: • ACES case file DOD information is accurate; • SNAP benefits are expunged and EBT cards are deactivated in accordance with existing policies; • cases are identified as potential fraud and referred for investigation as warranted; and • unallowable costs are identified and reported to Federal oversight agencies, and required recoupment activities are pursued. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with this finding and will review the current SOP governing DOD procedures and will implement enhancements to ensure DOD is updated and that related required actions are taken within allowable timeframes. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-04)
(2023-033) Title: Internal control over automated SNAP eligibility certification periods needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $18,090 Likely Questioned Costs: Undeterminable; incorrectly suspending Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to households. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.10 and .12 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP, which includes automatic cutoff of participation for households which have not been recertified at the end of their certification period. SNAP households must be assigned eligibility certification periods of at least six months unless the household is classified as exempt based on program regulations. The State agency must have at least one contact with each SNAP household every 12 months. Submission of periodic eligibility reports is required by non-exempt households. Non-exempt households that are certified for longer than six months must file a periodic report between four months and six months, as required by the State agency. In addition, the State agency must not require the submission of periodic reports by households certified for 12 months or less in which all adult members are elderly or have a disability and no earned income. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all case file information necessary to properly process eligibility determinations and benefit computations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations, including notification letters to clients when 6-month reports and 12-month redeterminations of eligibility are required. All SNAP households, except for elderly and disabled cases with no earned income, are required to submit 6-month reports. In addition, all SNAP households must undergo an annual redetermination of eligibility. Each household’s recertification requirements are indicated by date fields in the ACES case file. If a required report or redetermination is not completed by the date indicated in the applicable field, the case’s monthly SNAP benefit is automatically suspended by the system. The Office of the State Auditor (OSA) tested a sample of 60 cases automatically suspended for failure to complete a required review in fiscal year 2023 to verify the accuracy of automated SNAP operations utilizing ACES. In 23 of the 60 cases tested, OSA identified that ACES incorrectly suspended benefits, as follows: • 20 cases were suspended due to inaccurate information in the applicable ACES date field. The Department identified the issue within ACES and implemented a system reconfiguration to correct review dates; however, the reconfiguration did not account for SNAP 6-month report and annual redetermination requirements. Of the 20 suspensions: o seven cases continued to receive SNAP benefits after a failure to complete required 6-month reports. This resulted in the following benefit overpayments, none of which were identified by the Department: • Two cases were suspended three months after the 6-month reporting requirement, resulting in known overpayments of $959 and $2,410. • Two cases were suspended four months after the 6-month reporting requirement, resulting in known overpayments of $1,597 and $525. • Three cases were suspended five months after the 6-month reporting requirement, resulting in known overpayments of $2,941, $2,376, and $1,818. o six cases were underpaid SNAP benefits totaling $5,941 because of incorrect benefit suspensions, ranging from one to five months prior to the applicable 6-month reporting requirement. o five cases were underpaid SNAP benefits totaling $2,194 because of incorrect benefit suspensions, ranging from 2 to 11 months prior to the annual redetermination requirement. o two cases were never required to submit 6-month reports or annual redeterminations since commencement of SNAP benefits in May 2021 and August 2021. This resulted in overpayments for the entirety of fiscal year 2023 totaling $2,539 and $2,925, respectively. • Three cases were suspended due to inaccurate information in the ACES case file indicating that required reviews were not completed. One case never received an automated ACES notification letter alerting them to complete the required 6-month report because of the system reconfiguration previously noted, and as a result, benefits were suspended. Two cases required annual redetermination information, which was submitted to the Department prior to the benefit suspension date, but benefits ended or lapsed due to untimely or incomplete review by the Department. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. 469 clients were automatically suspended by ACES during fiscal year 2023 due to recertification or redetermination requirements. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight • Automated SNAP eligibility system recertification and suspension criteria was not configured in accordance with Federal regulations. Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • Benefits may be incorrectly suspended, resulting in households being underpaid or overpaid. Recommendation: We recommend that the Department enhance policies and procedures to ensure that automated SNAP eligibility certification periods and related ACES case file fields are properly configured to process benefits in accordance with Federal regulations. In addition, we recommend that the Department identify underpayments and/or overpayments resulting from recertification period errors and take action as warranted. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with the exceptions as noted and has previously taken the necessary steps to eliminate these issues. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-03)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-046) Title: Internal control over CACFP eligibility determination and claim reimbursement procedures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child and Adult Care Food Program (CACFP) Assistance Listing Number: 10.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $19,362 Likely Questioned Costs: Undeterminable; due to the variety of institution types in the test population and varied meal claim counts, the projection of questioned costs utilizing the error rate related to the known exceptions would not provide a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 226; Child and Adult Care Food Program Memorandum #1-94 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Day care homes (DCHs) are defined as an organized nonresidential childcare program for children enrolled in a private home, licensed or approved as a family or group DCH and under the auspices of a Sponsoring Organization (SO). Each State agency shall establish procedures for institutions to properly submit claims for reimbursement (CFRs). Such procedures must include State agency edit checks, including but not limited to ensuring that payments are made only for approved meal types and that the number of meals for which reimbursement is provided does not exceed the product of the total enrollment, operating days, and approved meal types. The CFR must report information in accordance with the financial management system established by the State agency, and in sufficient detail to justify the reimbursement claimed. In submitting a CFR, each institution must certify that the claim is correct and that records are available to support that claim. Prior to submitting its consolidated monthly claim to the State agency, each SO must conduct reasonable edit checks on the sponsored centers’ meal claims. Each SO shall accept final administrative and financial responsibility for food service operations in all facilities under its jurisdiction. Reimbursement may not be claimed for meals served to children who are not enrolled, or for meals served at any one time to children in excess of the home’s authorized capacity. Child and Adult Care Food Program (CACFP) Memorandum #1-94 states that CACFP regulations define a DCH as a private residence, and that commercial properties including churches and schools are not private residences and are not eligible to participate in CACFP as a family DCH. Condition: CACFP provides nutritious foods that contribute to the wellness, healthy growth, and development of eligible children and adults receiving care in day care centers, DCHs operating under SOs, and at-risk after school snack programs. Child Nutrition Services (CNS) within the Department of Education administers CACFP. Eligibility Determinations CNS utilizes Federal certifications or State licenses to determine eligibility for participation in the program. The Office of the State Auditor (OSA) tested eligibility determinations for 23 facilities and found: • one SO provided expired Federal certifications to support eligibility applications for two childcare facilities (CCFs). The certifications expired in February of 2022; however, the application was approved in September 2022, and the provider was reimbursed for all claims in fiscal year 2023. OSA verified the facility was certified. • two DCH providers had capacities reduced as a result of Department of Health and Human Services inspections; however, the reduced capacities were not documented on the revised applications. The DCH providers continued to claim at a higher capacity, resulting in questioned costs totaling $1,383. • for 10 providers that were licensed as CCFs, CNS could not provide documentation to verify that providers were operating in a private residence and not a commercial or academic property. OSA verified that 8 of the 10 CCFs were private residences. OSA selected a non-statistical random sample. Claims for Reimbursement Each adult and childcare institution including DCHs, at-risk facilities, and childcare centers must submit a monthly CFR to the State. Independent centers and at-risk centers submit claims directly to CNS. CFRs from DCHs are first submitted to SOs, who are responsible for reviewing and consolidating claims into one comprehensive CFR for submission to CNS. CNS reimburses the SOs and centers for meals served based on information documented in the CFR. CNS utilizes the Child Nutrition Program (CNPWeb) system to process monthly claims. Providers enter information such as operating days, meal types, enrollment, attendance, and licensure into the system. This information is processed through system edit checks to ensure CFRs are allowable. CNS relies on the system edits; however, the edits were not properly implemented and operating as intended during fiscal year 2023. OSA tested meals claimed on 60 CFRs submitted by sponsors or SOs and found: • 23 CFRs included meals claimed which exceeded allowable licensed capacity for the facility. CNS approved and paid the claims without requesting documentation to support the allowability of the meals claimed. Of the 23 CFRs: o 21 providers indicated shift feeding. Shift feeding allows providers to serve meals over licensed capacity if children are not all in care at the same time. The submitted claims did not include documentation to support that capacity was not exceeded at any one time. o three providers did not indicate shift feeding; however, the average daily meals and attendance exceeded capacity. o 15 CFRs included nine providers that were allowed to claim in excess of licensed capacity; CNS erroneously allowed the providers’ children in determination of allowable capacity. Questioned costs related to undocumented shift feeding or meals claimed in excess of licensed capacity totaled $16,421 in fiscal year 2023. • one CFR had meals claimed that exceeded the maximum number of meals per child in attendance, resulting in questioned costs of $8. • two CFRs had meals claimed where attendance exceeded enrollment, resulting in questioned costs totaling $534. • 11 CFRs included claims for evening snacks served; however, application records indicate the facility was closed, resulting in questioned costs totaling $1,016. OSA selected consolidated CFRs submitted by one SO for all 12 months; a risk-based approach was used to select DCH claims from those consolidated CFRs. OSA selected a non-statistical random sample of all other CFRs. Context: In fiscal year 2023, CACFP expenditures totaled $9.8 million, of which $9.7 million in CACFP funds was provided to 104 sponsors. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • CCFs currently eligible to operate as DCHs may not be eligible to continue participating as DCHs if it is determined that the properties are commercial properties. Recommendation: We recommend that the Department enhance policies and procedures to require: • a review of licensing status, property type and capacity for all providers during each fiscal year; • documentation to support claims made in excess of licensed capacity or enrollment; and • a secondary review of monthly CFRs for accuracy prior to approval. We further recommend that the Department follow up with sponsors and SOs to identify unallowable costs and recoup costs if warranted. Corrective Action Plan: See F-23 Management’s Response: The Department partially agrees with this finding. The Department disagrees with the finding in relation to the property type, according to Federal Guidelines, submitted to OSA directly from the USDA, the State Agency is in compliance with Small Facility Approvals. Due to the state interpretation, we will develop a property form for new small facilities to confirm their residential status prior to approval for participation into the CACFP Program. The Department will update procedures to support claims made in excess of licensed capacity or enrollment and will require a secondary review of CFRs. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 Auditor’s Concluding Remarks: CACFP Memorandum #1-94 provided by the U.S. Department of Agriculture specifically states that CACFP regulations define a DCH as a private residence, and that commercial properties, including churches and schools, are not private residences and are not eligible to participate in CACFP as a family DCH. CNS could not provide verification that providers were operating in a private residence and not a commercial or academic property. The finding remains as stated. (State Number: 23-1115-02)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-031) Title: Internal control over SNAP eligibility determinations and benefit calculations needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $7,491 Likely Questioned Costs: Undeterminable; incorrectly calculated Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to clients. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.1 and .10; Families First Coronavirus Response Act (Public Law 116-127), Section 2302 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. Individuals or a group of individuals paying a reasonable amount for meals or meals and lodging must be considered boarders and are not eligible to participate in SNAP independently of the household providing the board. State agencies must calculate a household’s expenses based on the expenses the household expects to be billed for during the certification period (12 months). The Families First Coronavirus Response Act (FFCRA) established emergency allotments for households participating in SNAP to provide temporary food needs at the applicable maximum allotment for the household size. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all casefile information necessary to properly process eligibility determinations and benefit calculations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations and related benefit calculations. The Office of the State Auditor (OSA) tested 60 household monthly benefit payments to verify the accuracy of SNAP operations utilizing ACES, and identified the following: • Three underpayments of monthly SNAP benefits totaling $1,242 due to errors by Department personnel while processing manual ACES case file modifications to income information • Four overpayments of monthly SNAP benefits, including: o one benefit overpayment totaling $918 due to income information not updated by the Department in the ACES case file in a timely manner o two benefit overpayments totaling $2,974; an income data exchange with ACES appropriately adjusted income information to the correct prior date in each case file; however, previously issued monthly benefit payments were not recalculated and recovered from households accordingly. o one benefit overpayment totaling $3,599; the client should have been classified as a “boarder” within the household, and therefore, ineligible to participate in SNAP independently of the household providing the board. • One case was identified where household expenses from which benefit amounts were calculated had not been updated since 2018. The Department did not calculate the household’s benefit allotment based on expected annual expenses, in line with the 12-month redetermination period required by SNAP program regulations. The client was paid an accurate total monthly benefit due to the emergency allotment from FFCRA, which provided the maximum benefit amount for this case. OSA selected a non-statistical random sample. The Department does not have adequate policies and procedures in place to ensure that ACES case file modifications, whether manual or system interfaced, that result in adjustments to previously issued monthly SNAP benefits are appropriately processed. This includes a recalculation of previously issued benefits when case file modifications are processed, establishment of corresponding overpayments or underpayments, and related follow-up actions with households. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits may be incorrectly calculated, resulting in households being underpaid and/or overpaid. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement additional policies and procedures to ensure that: • case information entered into ACES is accurate; • automated eligibility determinations and benefit calculations are processed in accordance with Federal regulations; and • recalculations of previously issued benefits and related follow-up actions occur when case file modifications are retroactive. Corrective Action Plan: See F-19 Management’s Response: The Department partially agrees with the exceptions noted; however, the Office for Family Independence has policies in place to ensure that information that is entered into ACES is accurate, that automated client eligibility determinations are processed in accordance with federal law and that recalculations of file modifications are retroactive, as applicable. The Department will continue to review its operating procedures to identify opportunities for improvement. Regarding the one case identified where household expenses had not been updated since 2018: The Head of Household (HH) has been receiving the full standard (FSUA) which means the expense deduction has been changing. The client & Department have been updating the medical expense deduction with timely verifications from the client. On the signed Review, the client checked that the above listed expenses were correct and checked the HH had no other shelter expenses other than the ones listed above. These actions are in compliance with 7 CFR 273.10(d)(4). The Department asserts that adequate safeguards are in place. The cost of implementing the recommendations would exceed the benefit realized in achieving 100 percent accuracy in determining eligibility. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: Regarding the one case noted in Management’s Response, the ACES case file does note changes in household medical expenses and Full Standard Utility Allowance (FSUA) values, including confirmation that the expenses were accurate during the household’s most recent annual recertification; however, the household’s monthly rent expense has been documented as “anticipated” and has not changed since 2018. The expenses have never been verified. 7 CFR 273.10 requires anticipated expenses to be based on the most recent month’s bills. At the time of audit testing, the expense information remained unchanged and unverified for approximately five years. For the seven exceptions identified which were not addressed in Management’s Response, existing policies and procedures resulted in inaccurate benefit payments. OSA recognizes that achieving 100 percent accuracy in determining eligibility and calculating benefit payments would likely not be feasible; however, a sample payment error rate of approximately 12 percent indicates that a review of operating procedures and implementation of improvements is necessary. The finding remains as stated. (State Number: 23-1108-02)
(2023-032) Title: Internal control over Medicaid and SNAP deceased client cases needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture U.S. Department of Health and Human Services Assistance Listing Title: SNAP Cluster (COVID-19) Medicaid Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561; 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $8,329 (ALN 10.551) Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) tested a sample of cases where Supplemental Nutrition Assistance Program (SNAP) benefits were issued after the client’s date of death (DOD). Issuance of benefits to a deceased client does not necessarily result in unallowable program costs, as the issued benefits may not be expended; therefore, an error rate cannot be applied to the population and a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.8 and .14 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. State agency action on information items about recipient households shall include review of information and comparison of it to case record information. State agencies must initiate and pursue actions on recipient households within 45 days of the receipt of the information items. States shall establish a system to verify and ensure that benefits are not issued to individuals who are deceased. States shall use the Social Security Administration’s (SSA) Death Master File, obtained through the State Verification and Exchange System. Condition: The Office for Family Independence (OFI) manages the Automated Client Eligibility System (ACES) that is used to determine eligibility for Federal assistance programs, including Medicaid and SNAP. Information maintained in ACES is relied upon by OFI for determining monthly SNAP benefits issued to client Electronic Benefit Transaction (EBT) cards, and by the Office of MaineCare Services for processing Medicaid claims. OFI relies on numerous data sources for identifying and providing client DOD information for input into ACES, including monthly data exchanges with the Maine Center for Disease Control & Prevention (MeCDC) Vital Records and weekly data reports from the SSA’s Death Master File. Federal program regulations require OFI to act on client cases within 45 days of receipt of DOD information. This includes review and comparison of DOD information to ACES case file information, and suspension of program participation and related benefits as warranted. OFI policies for SNAP require deactivation of the client’s EBT card as well as expungement of authorized benefits from the EBT card. If activity occurred on the client’s EBT card subsequent to the DOD, the case must be reported as potential fraud and referred for investigation. The Office of the State Auditor (OSA) obtained DOD information from MeCDC Vital Records and compared it to clients who received Medicaid and SNAP benefits during fiscal year 2023. OSA identified 95 Medicaid claims with service dates after DOD in fiscal year 2023 and reviewed 30 clients with the largest paid claim amounts. Because certain Medicaid claims with service dates after DOD are considered allowable, claims paid on behalf of the deceased clients noted below are not reported as questioned costs: • Two clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. • Two clients did not have a DOD recorded in ACES but were reported as deceased by MeCDC Vital Records. Furthermore, four Medicaid clients with an incorrect DOD identified by OSA during the fiscal year 2022 audit were still not corrected in ACES. OSA identified 671 cases where SNAP benefits were issued more than 52 days following the client’s DOD; this benchmark was applied to denote the 45-day Federal program regulation related to weekly receipt of DOD information. OSA tested 60 of these SNAP cases and identified the following: • 18 single member household clients had EBT card purchase activity after DOD. Of these 18 clients: o 14 clients had transaction activity after DOD that occurred in fiscal year 2023, resulting in unallowable costs totaling $8,329, as follows: • For 13 of the 14 clients, unauthorized transaction activity totaling $7,297 occurred between the actual DOD and the Department’s receipt and processing of the DOD information in ACES. • One of the 14 clients did not have a DOD recorded in their ACES case file at the time of audit testing but was reported as deceased by MeCDC Vital Records; this resulted in $1,032 of unauthorized transaction activity. o Four clients’ DOD occurred in fiscal year 2023 and benefits continued to be authorized and issued; however, the unallowable purchase activity began subsequent to fiscal year 2023. o Four clients were not identified as potential fraud in the ACES case file. As a result, they were not referred for investigation as required by OFI policies. • Five clients had a DOD recorded in ACES that did not agree to the DOD provided by MeCDC Vital Records. This resulted from the Department’s practice of entering DODs as the last day of the month or an alternative date from public information sources in order to suspend benefits in cases where DOD information is not immediately available; however, the Department had MeCDC Vital Records information at the time of DOD input for all five clients and should have entered DODs based on those records. • One client did not have a DOD recorded in their ACES case file but was reported as deceased by MeCDC Vital Records; benefits were authorized during fiscal year 2023, but no unauthorized transaction activity occurred. • 10 clients’ benefits were not expunged upon receipt of DOD information as required by OFI policies; benefits were only expunged by the system-automated process based on inactivity after 274 days. For 2 of the 10 clients, the EBT card was never deactivated; therefore, benefits remained open and available for use 274 days after DOD. • One client’s case remained open two months after OFI was notified of the client’s DOD, resulting in two months of unauthorized SNAP benefit issuances. • Two clients’ ACES case file information partially matched DOD information from MeCDC Vital Records, including names and dates of birth; however, the client social security numbers did not match. The Department did not review the cases to determine appropriate follow-up action. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately: • 575,000 Medicaid clients with $2.5 billion in Federal benefits. Of the 575,000 Medicaid clients, 9,826 had a DOD in fiscal year 2023. • 127,000 SNAP clients with $484.8 million in Federal benefits. Of the 127,000 SNAP clients, 2,021 had a DOD in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Medicaid claims paid on behalf of deceased clients may go undetected. • SNAP benefits issued to deceased clients may result in unauthorized EBT card purchase activity. • Known questioned costs for SNAP • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that DOD information is received, reviewed, and updated in ACES on a more frequent basis to prevent unallowable Medicaid claim payments, and unauthorized SNAP benefit issuances and EBT card purchase activity. In addition, we recommend that the Department review all client cases noted in the Condition of this finding to ensure that: • ACES case file DOD information is accurate; • SNAP benefits are expunged and EBT cards are deactivated in accordance with existing policies; • cases are identified as potential fraud and referred for investigation as warranted; and • unallowable costs are identified and reported to Federal oversight agencies, and required recoupment activities are pursued. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with this finding and will review the current SOP governing DOD procedures and will implement enhancements to ensure DOD is updated and that related required actions are taken within allowable timeframes. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-04)
(2023-033) Title: Internal control over automated SNAP eligibility certification periods needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster (COVID-19) Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $18,090 Likely Questioned Costs: Undeterminable; incorrectly suspending Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to households. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.10 and .12 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP, which includes automatic cutoff of participation for households which have not been recertified at the end of their certification period. SNAP households must be assigned eligibility certification periods of at least six months unless the household is classified as exempt based on program regulations. The State agency must have at least one contact with each SNAP household every 12 months. Submission of periodic eligibility reports is required by non-exempt households. Non-exempt households that are certified for longer than six months must file a periodic report between four months and six months, as required by the State agency. In addition, the State agency must not require the submission of periodic reports by households certified for 12 months or less in which all adult members are elderly or have a disability and no earned income. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all case file information necessary to properly process eligibility determinations and benefit computations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations, including notification letters to clients when 6-month reports and 12-month redeterminations of eligibility are required. All SNAP households, except for elderly and disabled cases with no earned income, are required to submit 6-month reports. In addition, all SNAP households must undergo an annual redetermination of eligibility. Each household’s recertification requirements are indicated by date fields in the ACES case file. If a required report or redetermination is not completed by the date indicated in the applicable field, the case’s monthly SNAP benefit is automatically suspended by the system. The Office of the State Auditor (OSA) tested a sample of 60 cases automatically suspended for failure to complete a required review in fiscal year 2023 to verify the accuracy of automated SNAP operations utilizing ACES. In 23 of the 60 cases tested, OSA identified that ACES incorrectly suspended benefits, as follows: • 20 cases were suspended due to inaccurate information in the applicable ACES date field. The Department identified the issue within ACES and implemented a system reconfiguration to correct review dates; however, the reconfiguration did not account for SNAP 6-month report and annual redetermination requirements. Of the 20 suspensions: o seven cases continued to receive SNAP benefits after a failure to complete required 6-month reports. This resulted in the following benefit overpayments, none of which were identified by the Department: • Two cases were suspended three months after the 6-month reporting requirement, resulting in known overpayments of $959 and $2,410. • Two cases were suspended four months after the 6-month reporting requirement, resulting in known overpayments of $1,597 and $525. • Three cases were suspended five months after the 6-month reporting requirement, resulting in known overpayments of $2,941, $2,376, and $1,818. o six cases were underpaid SNAP benefits totaling $5,941 because of incorrect benefit suspensions, ranging from one to five months prior to the applicable 6-month reporting requirement. o five cases were underpaid SNAP benefits totaling $2,194 because of incorrect benefit suspensions, ranging from 2 to 11 months prior to the annual redetermination requirement. o two cases were never required to submit 6-month reports or annual redeterminations since commencement of SNAP benefits in May 2021 and August 2021. This resulted in overpayments for the entirety of fiscal year 2023 totaling $2,539 and $2,925, respectively. • Three cases were suspended due to inaccurate information in the ACES case file indicating that required reviews were not completed. One case never received an automated ACES notification letter alerting them to complete the required 6-month report because of the system reconfiguration previously noted, and as a result, benefits were suspended. Two cases required annual redetermination information, which was submitted to the Department prior to the benefit suspension date, but benefits ended or lapsed due to untimely or incomplete review by the Department. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the State provided approximately 127,000 SNAP clients with $484.8 million in Federal benefits. 469 clients were automatically suspended by ACES during fiscal year 2023 due to recertification or redetermination requirements. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight • Automated SNAP eligibility system recertification and suspension criteria was not configured in accordance with Federal regulations. Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • Benefits may be incorrectly suspended, resulting in households being underpaid or overpaid. Recommendation: We recommend that the Department enhance policies and procedures to ensure that automated SNAP eligibility certification periods and related ACES case file fields are properly configured to process benefits in accordance with Federal regulations. In addition, we recommend that the Department identify underpayments and/or overpayments resulting from recertification period errors and take action as warranted. Corrective Action Plan: See F-19 Management’s Response: The Department agrees with the exceptions as noted and has previously taken the necessary steps to eliminate these issues. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 23-1108-03)
(2023-038) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.15; Richard B. Russell National School Lunch Act Sec. 19; U.S. Department of Agriculture Fresh Fruit and Vegetable Program Handbook; Policy Memo: COVID-19: Child Nutrition Response #114 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and adequately documented. Claims for reimbursement must be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. The Department is required to review each School Food Authority’s (SFA) claim for reimbursement, on a monthly basis, to ensure that monthly claims are limited to the number of lunches served to eligible children. The Department then reimburses the SFA for actual meals served, based on the SFA’s claim for reimbursement utilizing rates that are programmed in the system. In accordance with 7 CFR 225.15, second meals must be served only after all participating children at the site's congregate meal service have been served a meal. Section 19 of the Richard B. Russell National School Lunch Act (NSLA) states that the per-student grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall not be less than $50, nor more than $75. U.S. Department of Agriculture’s (USDA) FFVP Handbook, referenced as guidance in Policy Memo SP 12-2022, states that all nonfood costs must be carefully reviewed and deemed reasonable. Policy Memo: Child Nutrition Response 114 for the Summer Food Service Program (SFSP) states that sponsors may only claim reimbursement for meals served retroactive to the date that a complete and correct application was received at the State agency, including meals that were served prior to their written approval to operate SFSP. This waiver from 7 CFR 225.9 states that all reimbursements shall be in accordance with the terms of this agreement. Reimbursements shall not be paid for meals served at a site before the sponsor has received written notification that the site has been approved for participation in the program. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, National School Lunch Program (NSLP), Special Milk Program for Children, SFSP and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools, residential childcare institutions, and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of child nutrition programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit claims for reimbursement based on actual meals served for the month and permissible fresh fruits and vegetables, utilizing the Child Nutrition Program (CNPWeb) system. The Department is required to review each SFA or sponsor’s claim for reimbursement to ensure that monthly claims are limited to the number of meals served to eligible children and that the cost of the fresh fruits and vegetables are allowable. Once the claims are approved, claims are reimbursed based on the rates that are programmed in the CNPWeb system. The Office of the State Auditor (OSA) tested claims for reimbursement (CFR) for CNC and found instances that did not align with program regulations for NSLP, FFVP, and SFSP, as follows: National School Lunch Program If there are revisions to claims after 60 days which increase the Federal reimbursement, Child Nutrition Services (CNS) is permitted to grant an exception once every 36 months. OSA tested 60 paid CFRs in NSLP and found one SFA’s CFR included two revisions that were more than 60 days after the last day of the claim month. The first revision submitted was not documented as an exception; as a result, the second revision submitted in excess of 60 days was erroneously processed. Fresh Fruit and Vegetable Program USDA guidance included in the FFVP Handbook states that most of a SFA’s FFVP funds must be used for purchasing fresh fruits and vegetables, all nonfood costs must be carefully reviewed and deemed reasonable, and that labor costs must be minimal. FFVP allocations must be determined at the State agency and result in a per-pupil allocation between $50 and $75 for participating SFAs. OSA tested 60 FFVP CFRs and found: • claims from 11 SFAs totaling $51,927 had sites with significant nonfood costs. o Six SFA’s CFRs included costs totaling $12,506; of this amount, fresh fruits and vegetables were less than 50 percent of the entire claim. o One SFA’s CFR included labor costs of $1,599 for two sites where no fresh fruits or vegetables were claimed. • CNS adjusted allocations to two SFAs, but after the adjustment, the SFAs exceeded the $75 maximum per-pupil allocation. OSA tested 20 SFAs that participated in FFVP and found that three exceeded their original allocation: • Two SFAs were provided additional funds as a result of a reallocation by CNS; however, the additional allocation resulted in per-pupil amounts that exceeded the maximum amount of $75. • One SFA overspent by $893 due to a claim system processing error. Summer Food Service Program SFSP allows sponsors to claim a percentage of second meals served after first meals have been served. SFSP reimbursement for second meals is dependent upon a sponsor’s total first meals claimed. In July 2022, USDA issued Child Nutrition Response 114 to waive certain application requirements to accommodate for changes made once the program year had begun. The policy memo states that sponsors may only claim reimbursement for meals served retroactively to the date that a complete and correct application was received by the State agency. Applications from sponsors include individual site sheets that specify mealtimes and operating days as part of the sponsor’s application; revisions to the site sheet affect both the completeness and accuracy of the application. OSA tested 44 SFSP CFRs and found: • one site claimed only second meals; no first meals had been claimed. • seven sponsors had approved site sheet revisions and retroactive adjustments; however, CNS did not document the date the revisions were initiated. The revisions included addition of meal types, new sites and days of operation. CNS did not document the reason for the revisions or the date of receipt. OSA selected non-statistical random samples. Context: CNC processed $69.9 million in CFRs in fiscal year 2023. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure: • CFRs revised after 60 days and granted a one-time exception are tracked; • CFRs for all SFAs participating in the FFVP are reviewed to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal; • SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit; and • revisions to SFSP applications, including site sheets, are properly documented. Corrective Action Plan: See F-20 Management’s Response: The Department agrees to the one-time exception and application documentation elements of this finding. We have created new procedures to ensure these areas are corrected. The Department disagrees with the recommendation to increase oversight in the FFVP as it aligns with USDA and Department of Education policies and procedures. CFRs for all SFAs participating in FFVP are reviewed to confirm that the amounts claimed for non-food costs are reasonable and labor costs are minimal. The USDA Fresh Fruit and Vegetable Program (FFVP) is a program that is monitored at the same time as the other Child Nutrition Programs, including NSLP and SBP. The administrative review process is conducted on an approved timeline set by the USDA, who administers all of the Child Nutrition Programs. Reviewing one month's claim for reimbursement (referred to as the "Review Period") follows federal requirements and is the NSLP review teams procedure for each review. This includes verifying meal counts for breakfast, lunch, and snack (if applicable) as well as FFVP expenses, if applicable. FFVP claims are reviewed to ensure that only allowable costs are being claimed. This includes food, labor and other costs, which non-food cost is a part of. There is also an edit check in the CNP web reimbursement system so that schools do not exceed the 10% administrative labor amount per grant award. Child Nutrition staff does not verify the meal counts for every claim for reimbursement that is submitted to us on a monthly basis for over 200 SFA's; therefore, having to do this for FFVP is unreasonable and would create a hardship for staff overseeing this program. The monitoring and edit check systems we have in place for FFVP allow for sufficient oversight of the program, including non-food and labor costs, and align with USDA and Department of Education policies and procedures. SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. Based on the NSLA Sec. 19, (f) Per-Student Grant- the per student grant provided to a school under this section shall be (2) not less than $50.00, nor more than $75.00; however under (i)Funding (7) Reallocation, (B) Within States- A State that receives a grant under this section may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary. Our interpretation is that any amounts can be reallocated after the initial grant award is given. Allocating above the $75.00/student would allow us to maximize use of federal funds and is in line with the language of the NSLA Sec. 19. We have schools each year that spend more than they were awarded and some that underspend their funds. Imposing this restriction would negatively impact schools that are using their funds as they may have to decrease the number of serving days or stop the program altogether prior to the end of the school year, thus negatively impacting students who benefit from this program. Contact: Adriane Ackroyd, Assistant Director Child Nutrition, DOE, 207-592-1722 Auditor’s Concluding Remarks: The USDA FFVP handbook outlines requirements for program oversight. These oversight procedures require states to review FFVP CFRs submitted by participating schools to ensure that expenditures are appropriate prior to providing reimbursement. The review process should ensure that the “majority of funds are used to purchase fresh produce” and “labor costs and all other non-food costs are minimal.” OSA’s testing of FFVP claims for reimbursement identified SFAs that had significant nonfood costs. The SFAs selected for testing submitted and were reimbursed for 31 different sites with nonfood costs ranging from 22 to 100 percent of the CFR. The Department did not provide justification to document the nonfood costs, including the site that claimed 100 percent for nonfood. Furthermore, the Department cites the annual monitoring review process as a mechanism to ensure CFRs for non-food costs are reasonable and labor costs are minimal; however, this process occurs after reimbursement is provided, not prior to reimbursement as required. In addition, OSA audit procedures over subrecipient monitoring reported finding 2023-043 Internal control over CNC subrecipient monitoring procedures needs improvement which identified an exception related to the documentation of FFVP program receipts. Accordingly, OSA recommends that the Department increase oversight over the program to ensure that CFRs are reviewed prior to reimbursement to confirm that the amounts claimed for nonfood costs are reasonable and labor costs are minimal as required by USDA. While NSLA Section 19(i)(7)(b) does outline that the State “may reallocate any amounts made available under the grant that are not obligated or expended by a date determined by the Secretary,” it does not override NSLA Section 19(f)(2) that specifies that the “per-student grant provided to a school under this section shall be not less than $50, nor more than $75.” The use of “under this section” in NSLA Section 19(f)(2) pertains to all of Section 19, including reallocations. As a result, OSA continues to recommend that the Department enhance policies and procedures to ensure SFAs that are provided additional FFVP funds are reviewed prior to reallocation to verify that SFAs will not be in excess of the allowed per-pupil limit. The finding remains as stated. (State Number: 23-1203-04)
(2023-048) Confidential finding, see below for more information Title: Internal control over UI claim payments needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 20 CFR 615.8; Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; Unemployment Insurance Program Letter No. 5-13; 26 MRSA 1190 through 1199 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. A State administering Unemployment Insurance (UI) must have State laws and policies in place that are consistent with Federal provisions and required by 20 CFR 615.8; the Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; and Unemployment Insurance Program Letter No. 5-13, as follows: • Standards for claim filing and processing including appeals and reviews, communication with claimants and employers, eligibility standards and disqualifications, and Interstate Benefit Payments and agreements • Standards for reasonable work search criteria and policies requiring performance of internal audits of work search activity • Standards for program integrity outlining procedures for identification and recovery of overpayments and penalties, including recovery through offset of future benefit payments The State of Maine’s statutory requirements for UI program benefits are outlined in 26 MRSA 1190 through 1199. Condition: Pursuant to paragraph 6.63 of the U.S. Government Accountability Office’s Government Auditing Standards (also known as the Yellow Book), we omitted details from this finding as they are confidential under the provisions of 5 MRSA 244-C (3). Though the content of this finding has been redacted, we provided the Department(s) with detailed information regarding the specific condition we identified, as well as the related criteria, context, causes, effects, and our specific recommendations for improvement. Department controls The Department has complementary controls in place over claimant eligibility, including: • performance of internal work search audits by MDOL personnel for one percent of weekly claims, and • establishment of a Benefits Quality Control Unit tasked with investigating a prescribed number of UI paid claims and denied claims each week. Audit testing results As part of the continuing eligibility determination process, State UI law requires a weekly claim to be filed and work search activities to be reported. In OSA’s test of 60 regular UI claimants’ continuing eligibility, one claimant did not report work search activities for the weeks claimed. Despite not meeting continuing eligibility requirements, the claimant was issued State UI benefits totaling $220. OSA selected a non-statistical random sample. Data analytics Data analytic procedures surrounding continuing eligibility requirements for weekly claim submission and work search activity entered by claimants identified that: • 18 claimants reported repetitive work search activities indicative of program abuse for consecutive benefit weeks and throughout the majority of their claims; • one claimant reported new return to work dates in 19 consecutive weekly claim submissions, which generated new temporary unemployment waivers that allowed the claimant to file all 19 weekly claims without reporting work search activities; • one claimant was granted a waiver with no end date, allowing the claimant to file 24 weekly claims without reporting work search activities; and • five claimants filed a total of eight claims with no work search activities reported. Context: The UI program provided $96.8 million in State UI benefits and $1.3 million in Federal UI benefits during fiscal year 2023. Cause: • Lack of adequate policies and procedures over initial and continuing claimant eligibility determinations • Lack of adequate supervisory oversight of information system application controls Effect: • Claimants may be incorrectly determined eligible for UI benefits without meeting Federal program requirements, which may result in unallowable issuances of benefit payments that could remain undetected. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance policies and procedures to require: • that eligibility requirements are met and adequately supported prior to issuance of benefit payments. • implementation of additional information system application controls. • incorporation of data analytics and data cross-matching procedures to prevent or detect payments to ineligible claimants. This will provide assurance that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. Corrective Action Plan: See F-24 Management’s Response: In a general sense the state has added significant controls around benefit eligibility, especially in the vital statistics area and work search. We continue to monitor all eligibility controls and work collaboratively with the state and federal government to enhance controls and strengthen program integrity. Specific to the findings: The agency agrees with the 18 claimants who provided repetitive work search efforts on their weekly claims. This subset of claimants used CareerCenter activities as their work search for numerous subsequent weeks. Per the Commission Rules, Chapter 10, subsection B (1) and (2), certain CareerCenter activities may count as a work search for the week claimed. However, due to recent OSA audits, additional controls were defined and implemented to avoid this exact scenario. The change was implemented with our 06/28/2023 build. As of that time in cases where a claimant reports a CareerCenter related activity on more than two weekly benefit claims, the claimant will be scheduled for a fact-finding to discuss their work search efforts. We anticipate seeing a significant improvement in this area for SFY 24. We agree with the finding on the single claimant who was granted consecutive work search waivers by reporting they were scheduled to start new employment within the next two weeks on their weekly claim. Additional controls in this area will be formulated and a change request filed to address this finding. We agree with the remaining six claimants’ control findings which were due to a variety of staff training issues. Some of these are in process of being addressed through refresher training, some of which had already been detected prior to OSA’s finding. One case will require additional review but was possibly due to a staff data entry error. We are encouraged by the continued collaboration with OSA, which has resulted in meaningful change and added controls in this area. We appreciate the opportunity provided and look forward to continued improvement. Contact: Laura Boyett, Director, Bureau of Unemployment Compensation, DOL, 207-621-5156 (State Number: 23-1302-01)
(2023-048) Confidential finding, see below for more information Title: Internal control over UI claim payments needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Labor State Bureau: Unemployment Compensation Federal Agency: U.S. Department of Labor Assistance Listing Title: Unemployment Insurance (UI) (COVID-19) Assistance Listing Number: 17.225 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 20 CFR 615.8; Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; Unemployment Insurance Program Letter No. 5-13; 26 MRSA 1190 through 1199 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. A State administering Unemployment Insurance (UI) must have State laws and policies in place that are consistent with Federal provisions and required by 20 CFR 615.8; the Middle Class Tax Relief and Job Creation Act of 2012; Social Security Act Title III, Section 303; and Unemployment Insurance Program Letter No. 5-13, as follows: • Standards for claim filing and processing including appeals and reviews, communication with claimants and employers, eligibility standards and disqualifications, and Interstate Benefit Payments and agreements • Standards for reasonable work search criteria and policies requiring performance of internal audits of work search activity • Standards for program integrity outlining procedures for identification and recovery of overpayments and penalties, including recovery through offset of future benefit payments The State of Maine’s statutory requirements for UI program benefits are outlined in 26 MRSA 1190 through 1199. Condition: Pursuant to paragraph 6.63 of the U.S. Government Accountability Office’s Government Auditing Standards (also known as the Yellow Book), we omitted details from this finding as they are confidential under the provisions of 5 MRSA 244-C (3). Though the content of this finding has been redacted, we provided the Department(s) with detailed information regarding the specific condition we identified, as well as the related criteria, context, causes, effects, and our specific recommendations for improvement. Department controls The Department has complementary controls in place over claimant eligibility, including: • performance of internal work search audits by MDOL personnel for one percent of weekly claims, and • establishment of a Benefits Quality Control Unit tasked with investigating a prescribed number of UI paid claims and denied claims each week. Audit testing results As part of the continuing eligibility determination process, State UI law requires a weekly claim to be filed and work search activities to be reported. In OSA’s test of 60 regular UI claimants’ continuing eligibility, one claimant did not report work search activities for the weeks claimed. Despite not meeting continuing eligibility requirements, the claimant was issued State UI benefits totaling $220. OSA selected a non-statistical random sample. Data analytics Data analytic procedures surrounding continuing eligibility requirements for weekly claim submission and work search activity entered by claimants identified that: • 18 claimants reported repetitive work search activities indicative of program abuse for consecutive benefit weeks and throughout the majority of their claims; • one claimant reported new return to work dates in 19 consecutive weekly claim submissions, which generated new temporary unemployment waivers that allowed the claimant to file all 19 weekly claims without reporting work search activities; • one claimant was granted a waiver with no end date, allowing the claimant to file 24 weekly claims without reporting work search activities; and • five claimants filed a total of eight claims with no work search activities reported. Context: The UI program provided $96.8 million in State UI benefits and $1.3 million in Federal UI benefits during fiscal year 2023. Cause: • Lack of adequate policies and procedures over initial and continuing claimant eligibility determinations • Lack of adequate supervisory oversight of information system application controls Effect: • Claimants may be incorrectly determined eligible for UI benefits without meeting Federal program requirements, which may result in unallowable issuances of benefit payments that could remain undetected. • Potential questioned costs and disallowances Recommendation: We recommend that the Department enhance policies and procedures to require: • that eligibility requirements are met and adequately supported prior to issuance of benefit payments. • implementation of additional information system application controls. • incorporation of data analytics and data cross-matching procedures to prevent or detect payments to ineligible claimants. This will provide assurance that payments to ineligible claimants are prevented, or detected and corrected, in a timely manner. Corrective Action Plan: See F-24 Management’s Response: In a general sense the state has added significant controls around benefit eligibility, especially in the vital statistics area and work search. We continue to monitor all eligibility controls and work collaboratively with the state and federal government to enhance controls and strengthen program integrity. Specific to the findings: The agency agrees with the 18 claimants who provided repetitive work search efforts on their weekly claims. This subset of claimants used CareerCenter activities as their work search for numerous subsequent weeks. Per the Commission Rules, Chapter 10, subsection B (1) and (2), certain CareerCenter activities may count as a work search for the week claimed. However, due to recent OSA audits, additional controls were defined and implemented to avoid this exact scenario. The change was implemented with our 06/28/2023 build. As of that time in cases where a claimant reports a CareerCenter related activity on more than two weekly benefit claims, the claimant will be scheduled for a fact-finding to discuss their work search efforts. We anticipate seeing a significant improvement in this area for SFY 24. We agree with the finding on the single claimant who was granted consecutive work search waivers by reporting they were scheduled to start new employment within the next two weeks on their weekly claim. Additional controls in this area will be formulated and a change request filed to address this finding. We agree with the remaining six claimants’ control findings which were due to a variety of staff training issues. Some of these are in process of being addressed through refresher training, some of which had already been detected prior to OSA’s finding. One case will require additional review but was possibly due to a staff data entry error. We are encouraged by the continued collaboration with OSA, which has resulted in meaningful change and added controls in this area. We appreciate the opportunity provided and look forward to continued improvement. Contact: Laura Boyett, Director, Bureau of Unemployment Compensation, DOL, 207-621-5156 (State Number: 23-1302-01)
(2023-058) Title: Internal control over CSLFRF expenditures needs improvement Prior Year Findings: None State Department: Economic and Community Development State Bureau: Commissioner’s Office Federal Agency: U.S. Department of the Treasury Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $591,845 Likely Questioned Costs: $591,845 Criteria: 2 CFR 200.303; 2 CFR 200.302; 2 CFR 200.403; Coronavirus State and Local Fiscal Recovery Fund 2022 Final Rule The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Costs must be adequately documented. The State’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to determine that such funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) recipients may use funds “to respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.” The CSLFRF 2022 Final Rule states (U.S.) Treasury is maintaining the interim final rule definition of “small business,” which used the Small Business Administration’s (SBA) definition of fewer than 500 employees, or per the standard for that industry, as defined by SBA. Condition: As part of the American Rescue Plan Act, the State was advanced $997 million in Federal CSLFRF to support its response to and recovery from the COVID-19 public health emergency. In response, Public Law 2022, Chapter 168, L.D. 2010 authorized funding to establish an energy rebate program for certain electricity customers. The law required the Department of Economic and Community Development (DECD) to make payments to utility companies for energy rebate credits to the accounts of eligible customers. To support the allowability of energy rebates to small businesses, DECD prepared the “Energy Rate Relief for Small Organizations” business case. In the business case, DECD stated its intent to use CSLFRF funding to provide direct credits to qualifying Maine small businesses to help defray increased electricity costs. DECD noted the project would provide direct relief utilizing the framework established in LD 2010, Resolve, To Help Certain Businesses with Energy Costs. The Maine Jobs and Recovery Review Committee reviewed and approved the business case on behalf of the State under the assumption that energy rebates would be provided to small businesses. DECD relied on utility companies to identify customers eligible for the energy rebate based on energy usage. Utility companies provided detailed lists of the customers which they deemed eligible to receive the rebate, and DECD reviewed and approved the invoices for payment. The Office of the State Auditor (OSA) reviewed the invoices and related payments to utility companies and identified credits were issued to several commercial entities ineligible under the CSLFRF 2022 Final Rule definition of “small business.” The entities listed included large businesses, government entities, and school systems. In total, OSA identified 234 entities credited a total of $591,845 that were not approved as supported by the business case. Context: Energy Rate Relief payments totaled $7.1 million of the $207.8 million in CSLFRF expenditures during fiscal year 2023. Cause: Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department review expenditures charged to CSLFRF, including the above-noted expenditures, to ensure that costs are allowable and align with the approved business case and Federal regulations. Corrective Action Plan: See F-26 Management’s Response: The Department agrees with this finding. Approved business cases are established under a single US Treasury expenditure category. Consistent with legislative direction, the scope of this business case was expanded during the original implementation to include additional allowable expenditure categories; however, the Department did not divide the original business case into multiple business cases to reflect the additional expenditure categories as required. The Department intends on dividing the approved business case into multiple business cases to align with the applicable US Treasury expenditure categories. Contact: Denise Garland, Deputy Commissioner, DECD, 207-624-7496 (State Number: 23-1699-01)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-062) Title: Internal control over Special Education period of performance needs improvement Prior Year Findings: None State Department: Education Administrative and Financial Services State Bureau: Special Services & Inclusive Education General Government Service Center Federal Agency: U.S. Department of Education Assistance Listing Title: Special Education Cluster (IDEA) (COVID-19) Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Period of performance Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $2,446,391 Likely Questioned Costs: Undeterminable; the exceptions noted in our sample represent nonroutine transactions; therefore, the projection of questioned costs utilizing the error rate related to known exceptions and amounts tested would not produce a reasonable estimate of likely questioned costs. Criteria: 2 CFR 200.303; 2 CFR 200.344; 2 CFR 200.403; 34 CFR 76.703 and .709 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Unless the Federal awarding agency authorizes an extension, the Department must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must obligate Federal award funds during the 27-month period of performance, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. Condition: The Department of Education’s (DOE) Office of Special Services & Inclusive Education, in conjunction with the Department of Administrative and Financial Services’ General Government Service Center (GGSC), administers Federal funding received through the Special Education Cluster (SEC) program. The SEC program provides grants to states, and through them to Local Education Agencies (LEAs), to assist in providing special education and related services to eligible children. DOE and GGSC review and approve requests for reimbursement from LEAs and invoices for other costs including payroll, administrative expenditures, and awards to subrecipients of State-level activities. This review includes a determination of whether the costs are obligated within the applicable Federal award’s period of performance through a comparison of billing dates and billing periods to grant award terms. Period of performance compliance requirements applicable to the SEC program in fiscal year 2023 relate to the Federal fiscal year 2021 grant award. The award’s obligation period ended September 30, 2022, and the liquidation period ended 120 calendar days following, on January 28, 2023. The Office of the State Auditor (OSA) tested 43 expenditure transactions that occurred during the Federal fiscal year 2021 grant award’s liquidation period to ensure that the expenditures were obligated and liquidated in accordance with Federal regulations, and identified the following: • Six transactions related to an obligation that occurred after the end of the period of performance. Upon further review, OSA determined that the full obligation included 20 transactions totaling $1.7 million. • Three obligations totaling $742,668 were liquidated after expiration of the liquidation period. The above-noted transactions did not meet the Federal fiscal year 2021 grant award’s period of performance requirements and are not allowable under the terms of the award. As a result, OSA identified questioned costs totaling $2.4 million. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department expended $71.6 million in SEC program funds. Of this total, $5.1 million of Federal fiscal year 2021 grant funds was expended during the award’s liquidation period which occurred during fiscal year 2023. The identified questioned costs of $2.4 million represent approximately 47 percent of the award funds expended during the liquidation period. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that obligation and liquidation of grant funds are made within period of performance requirements established in the terms and conditions of Federal grant awards. Corrective Action Plan: See F-27 Management’s Response: The Department agrees with this finding. The Department will review and implement stronger internal controls to ensure obligations and final payments are made within the period of performance requirements. Regarding the 20 transactions totaling $1.7 million, all expenditures reimbursed were within the period of performance, however there was a lengthy delay in determining the final payment mechanism. Due to this delay, the final obligation date in Advantage was outside of the grant's date of obligation. Contact: Nicole Denis, Director of Finance, DOE, 207-530-2161 (State Number: 23-1201-02)
(2023-064) Title: Internal control over ESF expenditures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Office of Federal Emergency Relief Programs Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $161,468 Likely Questioned Costs: $7,308,277; likely questioned costs were projected by dividing the known questioned costs in our sample by total expenditures tested to establish an error rate, then applying that error rate to total expenditures paid in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; Coronavirus Aid, Relief, and Economic Security Act, Public Law No. 116-136; Coronavirus Response and Relief Supplemental Appropriations Act, Public Law No. 116-260; American Rescue Plan Act, Public Law No. 117-2 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Coronavirus Aid, Relief, and Economic Security Act; Coronavirus Response and Relief Supplemental Appropriations Act; and American Rescue Plan (ARP) Act authorized the creation of the Education Stabilization Fund and its subprograms. Governors and State Education Agencies (SEAs) must demonstrate that costs incurred by governors, SEAs, and subrecipients are allowable under the relevant statutory and regulatory provisions, assurances, and certification and agreement, and consistent with the purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to COVID-19. Condition: Education Stabilization Funds (ESF) were authorized by Federal legislation for use by school administrative units (SAUs) within the State to prevent, prepare for, and respond to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF including planned projects. Applications included detail on costs and the necessity of costs as a result of the COVID-19 pandemic. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for expenditures identified and approved in the application. The Office of the State Auditor (OSA) tested 60 SAU reimbursement requests for ESF and identified the following: • One ARP Elementary and Secondary School Emergency Relief (ESSER) subprogram reimbursement request included an invoice for a tractor purchase totaling approximately $91,000. The SAU’s approved application stated that the purpose of the tractor purchase was to help with lawn mowing, snow removal, and outdoor maintenance so that the school could safely engage in more outdoor learning. • One ARP ESSER subprogram reimbursement request included an invoice for a paving project totaling $47,500. The paving project was included in the SAU’s approved application. The reimbursement request outlined that the “paving improvements in [the] bus area [were] to help facilitate with disinfecting and cleaning of buses.” • Supporting documentation for OFERP’s review prior to approval of one ESSER II subprogram reimbursement request totaling $22,896 was not maintained. OSA was able to verify the allowability of the costs based on documentation provided by OFERP during audit testing. • One ARP ESSER subprogram reimbursement request included oil and electricity utility bills totaling $14,710. • One ESSER II subprogram reimbursement request included oil and electricity utility bills totaling $8,258. All subrecipients had an approved application on file with OFERP. The applications and the invoices were approved for reimbursement by OFERP. The purpose of ESF is to prevent, prepare for, and respond to COVID-19. The project descriptions and supporting documentation for the tractor purchase and paving project provided by the SAU and maintained by the Department do not demonstrate that these reimbursements are a reasonable use of funds consistent with the purpose of ESF. In addition, utility bills such as oil and electricity are routine costs that are supported by a SAU’s annual operating budget, and these reimbursements are not consistent with the purpose of ESF. OSA selected a non-statistical random sample. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of established policies and procedures to ensure that only necessary expenditures are charged to the Federal program • Misinterpretation of Federal regulations Effect: • Noncompliance with Federal regulations • Known questioned costs • Potential future questioned costs and disallowances Recommendation: We recommend that the Department review all expenditures reimbursed using ESF to ensure that only allowable costs are charged to the Federal program. Expenditures that do not meet ESF criteria for allowability should be transferred out of ESF. Corrective Action Plan: See F-28 Management’s Response: The Maine Department of Education (MDOE) disagrees with the identified questioned costs. The FERP utilized guidance provided by the U.S. Department of Education (grantor) and conferred in writing with Maine’s assigned U.S. Department of Education program officer throughout the Education Stabilization Fund application review process. The Maine Department of Education’s FERP provided the auditor with the grantor’s guidance which clearly states that the questioned costs were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Throughout the application review process, FERP utilized ESF federal statutory language and the grantor’s published guidance to determine allowability. Once funding applications were approved, SAUs requested reimbursement from the FERP for the approved costs outlined in the school administrative unit (SAU) application. The FERP reviewed SAU reimbursement requests and provided payment for approved expenses. The ESF costs outlined in this finding were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 Auditor’s Concluding Remarks: Documentation provided by the Department for the reimbursements totaling $161,468 did not provide adequate evidence that the expenditures were reasonable, necessary, and in line with the allowability criteria of ESF, as outlined below: • A $91,000 tractor purchase is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. While outdoor learning space may have been expanded in response to COVID-19, lawn mowing, snow removal, and outdoor maintenance are routine costs of the SAU. • A $47,500 paving project is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. There is no direct correlation between paving improvements and disinfecting and cleaning of buses. • $22,968 in oil and electricity bill reimbursements are not reasonable or necessary uses of funds in response to needs directly arising from the public health emergency. Utility bills are routine costs that are supported by a SAU’s annual operating budget. Federal guidance for the ESF program does not clearly state that the expenditures noted as questioned costs are allowable, reasonable, and necessary to prevent, prepare for, and respond to COVID-19. Furthermore, the Department did not provide grantor guidance to OSA as stated in Management’s Response. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Without documentation and evidence to substantiate that the expenditures are necessary and reasonable in response to needs directly arising from the public health emergency, OSA cannot determine that the reimbursements were consistent with the purpose of ESF; therefore, OSA continues to question the allowability of these costs. The finding remains as stated. (State Number: 23-1235-03)
(2023-064) Title: Internal control over ESF expenditures needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Office of Federal Emergency Relief Programs Federal Agency: U.S. Department of Education Assistance Listing Title: Education Stabilization Fund (ESF) (COVID-19) Assistance Listing Number: 84.425D, 84.425U Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $161,468 Likely Questioned Costs: $7,308,277; likely questioned costs were projected by dividing the known questioned costs in our sample by total expenditures tested to establish an error rate, then applying that error rate to total expenditures paid in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; Coronavirus Aid, Relief, and Economic Security Act, Public Law No. 116-136; Coronavirus Response and Relief Supplemental Appropriations Act, Public Law No. 116-260; American Rescue Plan Act, Public Law No. 117-2 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Coronavirus Aid, Relief, and Economic Security Act; Coronavirus Response and Relief Supplemental Appropriations Act; and American Rescue Plan (ARP) Act authorized the creation of the Education Stabilization Fund and its subprograms. Governors and State Education Agencies (SEAs) must demonstrate that costs incurred by governors, SEAs, and subrecipients are allowable under the relevant statutory and regulatory provisions, assurances, and certification and agreement, and consistent with the purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to COVID-19. Condition: Education Stabilization Funds (ESF) were authorized by Federal legislation for use by school administrative units (SAUs) within the State to prevent, prepare for, and respond to the COVID-19 pandemic. SAUs were required to submit applications to the Office of Federal Emergency Relief Programs (OFERP) under the Department of Education outlining identified uses for ESF including planned projects. Applications included detail on costs and the necessity of costs as a result of the COVID-19 pandemic. Program coordinators within OFERP were responsible for reviewing and approving applications submitted by SAUs. Once there was an approved application on file, SAUs could submit reimbursement requests to the Department for expenditures identified and approved in the application. The Office of the State Auditor (OSA) tested 60 SAU reimbursement requests for ESF and identified the following: • One ARP Elementary and Secondary School Emergency Relief (ESSER) subprogram reimbursement request included an invoice for a tractor purchase totaling approximately $91,000. The SAU’s approved application stated that the purpose of the tractor purchase was to help with lawn mowing, snow removal, and outdoor maintenance so that the school could safely engage in more outdoor learning. • One ARP ESSER subprogram reimbursement request included an invoice for a paving project totaling $47,500. The paving project was included in the SAU’s approved application. The reimbursement request outlined that the “paving improvements in [the] bus area [were] to help facilitate with disinfecting and cleaning of buses.” • Supporting documentation for OFERP’s review prior to approval of one ESSER II subprogram reimbursement request totaling $22,896 was not maintained. OSA was able to verify the allowability of the costs based on documentation provided by OFERP during audit testing. • One ARP ESSER subprogram reimbursement request included oil and electricity utility bills totaling $14,710. • One ESSER II subprogram reimbursement request included oil and electricity utility bills totaling $8,258. All subrecipients had an approved application on file with OFERP. The applications and the invoices were approved for reimbursement by OFERP. The purpose of ESF is to prevent, prepare for, and respond to COVID-19. The project descriptions and supporting documentation for the tractor purchase and paving project provided by the SAU and maintained by the Department do not demonstrate that these reimbursements are a reasonable use of funds consistent with the purpose of ESF. In addition, utility bills such as oil and electricity are routine costs that are supported by a SAU’s annual operating budget, and these reimbursements are not consistent with the purpose of ESF. OSA selected a non-statistical random sample. Context: In fiscal year 2023, ESF expenditures totaled $178.2 million, of which $167.8 million was paid to subrecipient SAUs. Cause: • Lack of established policies and procedures to ensure that only necessary expenditures are charged to the Federal program • Misinterpretation of Federal regulations Effect: • Noncompliance with Federal regulations • Known questioned costs • Potential future questioned costs and disallowances Recommendation: We recommend that the Department review all expenditures reimbursed using ESF to ensure that only allowable costs are charged to the Federal program. Expenditures that do not meet ESF criteria for allowability should be transferred out of ESF. Corrective Action Plan: See F-28 Management’s Response: The Maine Department of Education (MDOE) disagrees with the identified questioned costs. The FERP utilized guidance provided by the U.S. Department of Education (grantor) and conferred in writing with Maine’s assigned U.S. Department of Education program officer throughout the Education Stabilization Fund application review process. The Maine Department of Education’s FERP provided the auditor with the grantor’s guidance which clearly states that the questioned costs were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Throughout the application review process, FERP utilized ESF federal statutory language and the grantor’s published guidance to determine allowability. Once funding applications were approved, SAUs requested reimbursement from the FERP for the approved costs outlined in the school administrative unit (SAU) application. The FERP reviewed SAU reimbursement requests and provided payment for approved expenses. The ESF costs outlined in this finding were allowable, reasonable, and necessary to prepare, prevent, and respond to the COVID-19 pandemic. Contact: Shelly Chasse-Johndro, Director of OFERP, DOE, 207-458-3180 Auditor’s Concluding Remarks: Documentation provided by the Department for the reimbursements totaling $161,468 did not provide adequate evidence that the expenditures were reasonable, necessary, and in line with the allowability criteria of ESF, as outlined below: • A $91,000 tractor purchase is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. While outdoor learning space may have been expanded in response to COVID-19, lawn mowing, snow removal, and outdoor maintenance are routine costs of the SAU. • A $47,500 paving project is not a reasonable or necessary use of funds in response to a need directly arising from the public health emergency. There is no direct correlation between paving improvements and disinfecting and cleaning of buses. • $22,968 in oil and electricity bill reimbursements are not reasonable or necessary uses of funds in response to needs directly arising from the public health emergency. Utility bills are routine costs that are supported by a SAU’s annual operating budget. Federal guidance for the ESF program does not clearly state that the expenditures noted as questioned costs are allowable, reasonable, and necessary to prevent, prepare for, and respond to COVID-19. Furthermore, the Department did not provide grantor guidance to OSA as stated in Management’s Response. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Without documentation and evidence to substantiate that the expenditures are necessary and reasonable in response to needs directly arising from the public health emergency, OSA cannot determine that the reimbursements were consistent with the purpose of ESF; therefore, OSA continues to question the allowability of these costs. The finding remains as stated. (State Number: 23-1235-03)
(2023-087) Title: Internal control over DHHS allocated costs needs improvement Prior Year Findings: None State Department: Administrative and Financial Services Health and Human Services State Bureau: Health and Human Services Service Center Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Title IV-E Prevention Program Foster Care – Title IV-E (COVID-19) Assistance Listing Number: 93.472; 93.658 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; Department of Health and Human Services’ Cost Allocation Plan The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Some accounts include costs that benefit multiple programs (cost pool accounts). A Random Moment Time Study (RMTS) allocation method is used to allocate certain Office of Child and Family Services cost pool accounts. RMTS is used to identify time spent on Title IV-E programs and time reimbursable for child welfare system operational costs. Condition: A Cost Allocation Plan (CAP) is used when a cost cannot be identified to a particular cost objective (direct expensed). The Department of Health and Human Services’ (DHHS) CAP is a written summary that documents how DHHS allocates cost pool accounts across multiple programs, including approved allocation methods by cost pool account, and is approved by the Federal government. The Office of the State Auditor (OSA) identified that the Foster Care – Title IV-E program’s allocated costs decreased by 31 percent in fiscal year 2023. In response to OSA’s inquiry, the Department acknowledged that the program was overcharged by $2.7 million due to incorrect RMTS statistic information that was provided beginning in October 2021 through April 2023. These costs should have been charged to ALN 93.472 Title IV-E Prevention Program. During the last quarter of fiscal year 2023, the Department initiated corrective action and appropriately transferred the unallowable costs that were incurred during fiscal year 2023 from the Foster Care – Title IV-E program to the Title IV-E Prevention Program. Context: Of the $80.2 million in costs allocated through the DHHS CAP, $11.9 million was correctly charged to the Foster Care – Title IV-E program and $4.9 million was correctly charged to the Title IV-E Prevention Program during fiscal year 2023. Cause: • Lack of adequate procedures to prevent, or detect and correct, errors timely • Lack of supervisory oversight Effect: • Potential questioned costs and disallowances if unallowable costs are charged to the wrong Federal program and not detected timely • Noncompliance with Federal requirements Recommendation: We recommend that the Department implement additional procedures to validate the accuracy of changes to the DHHS CAP before implementation and to enhance monitoring procedures over allocated costs. This will ensure that Federal programs are appropriately charged through the DHHS CAP in accordance with Federal regulations. Corrective Action Plan: See F-36 Management’s Response: The DHHS and DHHS Financial Service Center agree with this finding. The DHHS Financial Service Center and the Office of Child and Family Services will implement additional procedures to validate the accuracy of OCFS applicable changes to the DHHS CAP by December 31, 2024. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 23-1103-01)
(2023-075) Title: Internal control over payments made to and on behalf of TANF clients needs improvement Prior Year Findings: See schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: $4,721 Likely Questioned Costs: $279,992; likely questioned costs were projected by dividing the identified known overpayment in our sample by total payments tested to establish an error rate, then applying that error rate to total payments to Temporary Assistance for Needy Families (TANF) clients for services and payments to providers on behalf of TANF clients in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 263.11 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must use Federal TANF funds for expenditures that are reasonably calculated to accomplish the purposes of TANF. Use of funds in violation of this is considered misuse of funds. Condition: The Department issues TANF payments directly to a TANF client for various items and services. The Department also issues TANF payments directly to providers on behalf of TANF clients for services rendered such as child care and transportation. The Office of the State Auditor (OSA) tested 60 payments and found that: • one payment issued in September 2022 underpaid a provider by $1 for Transitional Child Care (TCC). Upon further review, OSA found an additional $666 overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $665. Both the underpayment and overpayment were identified by OSA during audit testing. • one payment issued in November 2022 correctly paid a provider $154 for TCC. Upon further review, OSA found that the Department received income documentation for the client after the payment was made which would decrease future weekly TCC payments. The Department did not recalculate the TCC payment as required, and as a result, an additional $1,020 was overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $1,020. The overpayment was identified by OSA during audit testing. • one payment issued in November 2022 overpaid a provider by $7 for TCC. Upon further review, OSA found an additional $210 overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $217. The overpayment was identified by OSA during testing. • one payment issued in January 2023 overpaid a TANF client a total of $247 for clothing. An advance allowance of $300 was issued to the TANF client, and the TANF client submitted receipts substantiating purchases of $53. The Department sent a letter to the client requesting receipts for the unsubstantiated amount but did not establish an overpayment. OSA is questioning costs totaling $247. The overpayment was identified by OSA during testing. • one payment issued in March 2023 correctly paid a provider $13 for TCC. Upon further review, OSA found that the Department received income documentation for the client after the payment was made which would decrease future weekly TCC payments. The Department did not recalculate the TCC payment as required and as a result, an additional $156 was overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $156. The overpayment was identified by OSA during audit testing. • one payment issued in April 2023 correctly paid a provider $138 for TCC. Upon further review, OSA found that the Department received income documentation for the client after the payment was made which would decrease future weekly TCC payments. The Department did not recalculate the TCC payment as required and as a result, an additional $88 was overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $88. The overpayment was identified by OSA during audit testing. In addition, Department controls identified the following overpayments. Because these payments were not in accordance with Federal regulations and the Department has not recouped the funds, OSA is questioning the costs: • one payment issued in September 2022 overpaid a TANF client by $150 for clothing. An advance allowance of $150 was issued to the TANF client; however, the TANF client did not submit a receipt substantiating the purchase as required. The Department identified the overpayment in March 2023, thus OSA is questioning costs totaling $150. • one payment issued in September 2022 overpaid a provider by $104 for TCC. Upon further review, OSA found an additional $2,074 overpaid to the childcare provider during fiscal year 2023, thus OSA is questioning costs totaling $2,178. The Department identified the overpayment in October 2022. OSA selected a non-statistical random sample. Context: In fiscal year 2023, payments to TANF clients for services other than direct cash benefits and payments to providers on behalf of TANF clients totaled $8.3 million. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department: • implement additional procedures to ensure that payments made to TANF clients and providers are accurate, allowable, and adequately documented; • increase monitoring procedures over these payments; and • establish recoupments of overpayments in instances where they have not yet been established. Corrective Action Plan: See F-31 Management’s Response: OFI disagrees with this finding. OSA’s interpretation of federal regulation regarding the recoupment of overpaid funds is incorrect, and benefit overpayments are identified and processed by OFI in compliance with federal regulation and policy. Overpayments are required to be recouped in the shortest timeframe possible, but the recoupment amount cannot exceed the standards as set by policy. Neither state policy nor federal regulation requires an overpayment to be recouped within the same state fiscal year it is identified, so it was not appropriate for OSA to include as questioned costs on that basis the two cases where recoupment did not occur in the same fiscal year that the overpayment was established. Further, OFI disputes how OSA calculated the questioned costs. Three of the payments tested by OSA were found to be correct at the time of issuance. OSA then reviewed all payments during the state fiscal year for the three cases and stated that parent fees should have been adjusted based on documentation in DocuWare. Transitional Child Care does not require changes in income to be reported during the certification period unless the gross income exceeds 250% of the federal poverty level (MPAM, Ch. V, A, (6)), and adjustment of the parent fees were not required for these cases. They should not be included in the list of exceptions. While OSA cites MPAM, Ch. V, A (6), “TCC payments remain constant until a redetermination is completed, or until the recipient or child care provider reports a change that affects the amount of TCC benefits (emphasis added)” the reported change did not affect the amount of TCC benefits. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Office for Family Independence (OFI) has misconstrued the finding. OSA does not expect the Department to recoup funds within the year they are identified. OSA does expect that when the Department identifies overpayments, recoupments are established for those overpayments. While OSA agrees that the Department identified two of the eight overpayments as noted in the finding, OFI did not take action and appropriately establish a related recoupment to ensure that funds would be recovered. Had appropriate action been taken by OFI, OSA would not have questioned the costs. Regarding the three cases “found to be correct at the time of issuance” in relation to the calculation of questioned costs: • OSA understands TCC payments do not require changes in income to be reported during the certification period unless the gross income exceeds 250 percent of the Federal poverty level; however, this is the reporting responsibility of the client, not the State. • Management’s Response cites Ch. V, A, (6) of the Department’s Maine Public Assistance Manual (MPAM) which states TCC payments remain constant until a redetermination is completed, or until the recipient or childcare provider reports a change that affects the amount of TCC benefits. For the three cases, the recipient self-reported a change in income. The Department did not recalculate the TCC payment, resulting in the childcare provider being overpaid during fiscal year 2023. The finding remains as stated. (State Number: 23-1111-03)
(2023-083) Title: Internal control over CCDF provider payments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U. S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $3,101 Likely Questioned Costs: $32,099; likely questioned costs were projected by dividing the known questioned costs in our sample by total provider payments tested to establish an error rate, then applying that error rate to total provider payments in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program provides funds to increase the availability, affordability, and quality of childcare services in the State. The Department provides biweekly payments to childcare providers for services rendered. Provider payment amounts are based on current childcare market rates and the approved childcare subsidy awarded on behalf of the child receiving care. Once the subsidy is awarded, the Department accepts electronic invoices from the provider through a portal. Invoices are reviewed and approved by the Department prior to payment processing. The Office of the State Auditor (OSA) tested 60 provider payments to verify that the payments were accurate and in line with program guidelines and identified one provider’s biweekly invoice was overpaid by $151 due to an inaccurate childcare subsidy determination. This error was not identified by the Department during the review and approval process and persisted for 10 months of fiscal year 2023, resulting in a total overpayment of $3,101. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $40.1 million to 1,056 providers in the CCDF program. Cause: Lack of adequate supervisory oversight Effect: • Inaccurate childcare subsidy determinations will result in overpayments or underpayments to providers. • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. The Department will enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. The Program will seek to maintain a below 10% threshold of improper payments as required by CCDF Rule. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-02)
(2023-083) Title: Internal control over CCDF provider payments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U. S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $3,101 Likely Questioned Costs: $32,099; likely questioned costs were projected by dividing the known questioned costs in our sample by total provider payments tested to establish an error rate, then applying that error rate to total provider payments in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program provides funds to increase the availability, affordability, and quality of childcare services in the State. The Department provides biweekly payments to childcare providers for services rendered. Provider payment amounts are based on current childcare market rates and the approved childcare subsidy awarded on behalf of the child receiving care. Once the subsidy is awarded, the Department accepts electronic invoices from the provider through a portal. Invoices are reviewed and approved by the Department prior to payment processing. The Office of the State Auditor (OSA) tested 60 provider payments to verify that the payments were accurate and in line with program guidelines and identified one provider’s biweekly invoice was overpaid by $151 due to an inaccurate childcare subsidy determination. This error was not identified by the Department during the review and approval process and persisted for 10 months of fiscal year 2023, resulting in a total overpayment of $3,101. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $40.1 million to 1,056 providers in the CCDF program. Cause: Lack of adequate supervisory oversight Effect: • Inaccurate childcare subsidy determinations will result in overpayments or underpayments to providers. • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. The Department will enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. The Program will seek to maintain a below 10% threshold of improper payments as required by CCDF Rule. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-02)
(2023-083) Title: Internal control over CCDF provider payments needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U. S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster (COVID-19) Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $3,101 Likely Questioned Costs: $32,099; likely questioned costs were projected by dividing the known questioned costs in our sample by total provider payments tested to establish an error rate, then applying that error rate to total provider payments in fiscal year 2023. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 98.68 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. In the Child Care and Development Fund (CCDF) State Plan, Lead Agencies are required to describe effective internal controls that are in place to ensure program integrity and accountability while maintaining continuity of services. Condition: The CCDF program provides funds to increase the availability, affordability, and quality of childcare services in the State. The Department provides biweekly payments to childcare providers for services rendered. Provider payment amounts are based on current childcare market rates and the approved childcare subsidy awarded on behalf of the child receiving care. Once the subsidy is awarded, the Department accepts electronic invoices from the provider through a portal. Invoices are reviewed and approved by the Department prior to payment processing. The Office of the State Auditor (OSA) tested 60 provider payments to verify that the payments were accurate and in line with program guidelines and identified one provider’s biweekly invoice was overpaid by $151 due to an inaccurate childcare subsidy determination. This error was not identified by the Department during the review and approval process and persisted for 10 months of fiscal year 2023, resulting in a total overpayment of $3,101. OSA selected a non-statistical random sample. Context: In fiscal year 2023, the Department provided $40.1 million to 1,056 providers in the CCDF program. Cause: Lack of adequate supervisory oversight Effect: • Inaccurate childcare subsidy determinations will result in overpayments or underpayments to providers. • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. Corrective Action Plan: See F-35 Management’s Response: The Department agrees with this finding. The Department will enhance oversight policies and procedures to ensure that childcare subsidy determinations and resulting provider payments are accurate. The Program will seek to maintain a below 10% threshold of improper payments as required by CCDF Rule. Contact: John Feeney, Chief Operating Officer, OCFS, DHHS, 207-626-8614 (State Number: 23-1114-02)