Finding 2023-055: U.S. Department of Health and Human Services ALN #93.323, Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Grant #Various Criteria: Federal regulation, 2 CFR 200.403(a) and (g), specify costs must be necessary and reasonable for the performance of the federal award and adequately documented to be allowable under federal awards. Federal regulation, 45 CFR 75.352(d), requires the Department of Public Health and Human Services (department) to monitor the activities of its subrecipients as necessary to ensure the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and terms and conditions of the subaward, and subaward performance goals are achieved. Federal guidance from the Centers for Disease Control and Prevention, ELC Reopening Schools: Support for Screening Testing to Reopen & Keep Schools Operating Safely, and related Frequently Asked Questions documents specify allowable costs related to reopening schools. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls were not adequate to ensure subawards of federal ELC funds were expended on allowable costs, as required by federal regulations. Questioned Costs: We question $163,158, which represents the amount of federal funds distributed to counties in fiscal year 2022 that were not supported by actual county expenditures as of June 2024. Additionally, for school subrecipients, we project likely questioned costs of $3,194,292 in federal funds. Questioned costs related to school subrecipients were calculated by applying the percentage of unallowed or unsupported costs identified in our sample to the total amount distributed to schools in the audit period. Context: During the audit period, the department distributed federal ELC funds to 45 county or local governments (county) and to schools in 42 counties. County distributions, supporting localized preparedness for adequate staffing, totaled approximately $4.8 million and were supported by subaward agreements. School distributions, supporting efforts to safely re-open schools around the state during the public health emergency, totaled approximately $9.1 million. We conducted a sample of distributions to subrecipients. Of the 388 distributions, we reviewed 20 to county governments and 20 to schools to determine if the department’s post-award monitoring procedures were effective. The sample was not statistically valid. For 20 of the distributions tested, we determined the department’s monitoring procedures insufficient due to lack of supporting documentation or due to our identification of unallowed costs not identified in the department’s review. Additional details for each county and school distributions follows: Distributions to Counties In fiscal years 2021 and 2022, the department distributed funds to counties as advanced payments. During the prior audit, we reported fiscal year 2021 distributions as questioned costs. In response to our prior audit recommendation, in fiscal year 2023 the department implemented procedures to distribute funds to counties quarterly after the county attested the funds were used in accordance with federal regulations and provided receipts and other documentation for the department’s review and approval. The department also retroactively requested, received, and reviewed support for distributions to counties made in fiscal years 2021 and 2022. As part of our sample, we reviewed four county distributions from fiscal year 2023 and noted department procedures ensured costs incurred were for allowable purposes before distributing federal funds to the county. For the 16 county distributions from fiscal year 2022, we reviewed the department’s tracking spreadsheet and underlying support for four county agreements to determine whether advanced payments from fiscal years 2021 and 2022 were fully utilized. One of the 16 counties had a remaining balance of $54,378 in federal ELC funds for which the county had not incurred or reported expenses against as of June 2024, the month when we reviewed the report. We also considered all data on the department’s tracking spreadsheet and determined as of fiscal year end 2023 eight additional counties had not fully exhausted advanced distributions of federal ELC funds from fiscal year 2022. Of these counties, three had a remaining advanced balance as of June 2024. We consider these outstanding balances totaling $108,800 questioned costs, which is in addition to the $54,378 discussed above. Distributions to Schools School re-opening grants were distributed to schools as lump-sum payments at three different intervals during the audit period. The purpose for these grants was to support school testing, prevention, and mitigation activities intended to support open, in-person school environments during the COVID-19 pandemic. Subsequent to distributing funds to schools, at six-month intervals for fiscal year 2022 awards and at grant close-out for fiscal year 2023 awards, the department required the school to provide support for the use of federal ELC funds. This was documented on a School Budget Expenditure Report. The department required the school to list expenditures by category. Per department guidance, supporting invoices or payroll reports were required only when an individual expense exceeded $5,000. We reviewed documentation provided by the department for the 20 school distributions selected in our sample. In many cases, the documentation provided was intended to support multiple distributions to the schools, not only the distribution selected for sample testing. We identified only one school where supporting documentation was sufficient to conclude federal ELC funds had been fully used for allowable purposes. For the remaining 19 schools, we found: • Supporting documentation for nine schools either did not include support for payroll costs or lacked sufficient detail to support expenditures incurred by the school were for the purpose of the ELC federal program. For seven schools, the payroll reports were dated between November 2023 and April 2024, well after the department’s July 2023 subaward closeout deadline. • One school claimed costs for a school superintendent and a cook, while another school shifted 25% of regular custodial costs to the ELC award for June 2023 salaries. We consider these costs unallowable as they are regular costs associated with school operations and not temporary staff hired or redirected for purposes of school reopening efforts. • Support from schools showed federal ELC funds were spent on items such as ice melt, a kitchen warmer oven, drinking fountains, cameras, printers, paper, toner, and ink. We consider these costs unallowable as they do not align with an allowable cost in the federal school reopening guidance. • One school reported costs totaling $42,761 for Covid-19 testing supplies. Based on our review, the underlying costs were mainly related to purchasing $10 gift cards used to incentivize Covid testing. The school’s incentive plan specified 300 $10 gift cards would be purchased, and distributions of gift cards would be tracked, signed for, and subjected to data analysis to ensure incentives distributed did not outnumber the tests performed. The department did not provide documentation to support its consideration of the discrepancy between expected and actual incentives for the school. Absent additional documentation, we consider the approximately $39,000 unallowable as they are not reasonable or necessary for the performance of the federal award. Per discussion with department personnel, as questions came up in the review of school Budget Expenditures Reports they would reach out to schools for additional documentation or clarification. Turnover in the position responsible for following up with schools contributed to the level of documentation available at the time of audit. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included two findings related to this issue. Finding #2021-062 recommended the department implement internal controls over federal ELC contractor and subrecipient payments and to reimburse those entities only for activities allowed by federal regulations. Finding #2021-054 recommended the department establish and document internal controls for and to conduct monitoring of subrecipients of federal ELC funds. Effect: The department has not complied with federal regulations requiring post-award monitoring of its subrecipients, which means risk exists that federal funds were not expended in accordance with federal award requirements. As part of resolving the issue, the federal government may require the department to repay unallowed or unsupported costs. Cause: Department internal controls in place during the audit period did not consistently include a review and follow-up on subrecipient documentation to support the use of federal ELC funds. • Prior audit findings related to county subrecipients were identified more than half-way through fiscal year 2022. At that time department staff were unaware of the degree of subrecipient monitoring required for subaward agreements. • As discussed in Finding #2023-054, the program staff did not properly identify schools as subrecipients during the audit period. While the department had procedures in place to review subaward close-out documentation submitted by schools, staff turnover contributed to limited follow-up. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Epidemiology and Laboratory Capacity for Infectious Diseases federal award to ensure adequate documentation for subrecipient payments is consistently obtained and reviewed to ensure funds were used for authorized purposes, and documentation of department decisions is maintained. B. Disburse funds to subrecipients for the ELC federal award only for activities allowed by federal regulations. C. Conduct post-award monitoring of subrecipients of federal ELC funds, as required by federal regulations. Views of Responsible Officials: The department conditionally concurs with this recommendation. The department disagrees that funds were not paid to subrecipients for allowable activities. The department acknowledges documentation of their review of costs could be enhanced. However, they believe a large portion of the costs are allowable based on discussions with their federal partners and subrecipients and are confident that additional documentation obtained from the subrecipients would support the questioned costs. Rebuttal of Views of Responsible Officials: We considered the department’s conditional concurrence. It is our position documentation available during the audit period or at the time of audit was not adequate to support that costs were allowable under the program. As such, our recommendation stands.
Finding 2023-055: U.S. Department of Health and Human Services ALN #93.323, Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Grant #Various Criteria: Federal regulation, 2 CFR 200.403(a) and (g), specify costs must be necessary and reasonable for the performance of the federal award and adequately documented to be allowable under federal awards. Federal regulation, 45 CFR 75.352(d), requires the Department of Public Health and Human Services (department) to monitor the activities of its subrecipients as necessary to ensure the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and terms and conditions of the subaward, and subaward performance goals are achieved. Federal guidance from the Centers for Disease Control and Prevention, ELC Reopening Schools: Support for Screening Testing to Reopen & Keep Schools Operating Safely, and related Frequently Asked Questions documents specify allowable costs related to reopening schools. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls were not adequate to ensure subawards of federal ELC funds were expended on allowable costs, as required by federal regulations. Questioned Costs: We question $163,158, which represents the amount of federal funds distributed to counties in fiscal year 2022 that were not supported by actual county expenditures as of June 2024. Additionally, for school subrecipients, we project likely questioned costs of $3,194,292 in federal funds. Questioned costs related to school subrecipients were calculated by applying the percentage of unallowed or unsupported costs identified in our sample to the total amount distributed to schools in the audit period. Context: During the audit period, the department distributed federal ELC funds to 45 county or local governments (county) and to schools in 42 counties. County distributions, supporting localized preparedness for adequate staffing, totaled approximately $4.8 million and were supported by subaward agreements. School distributions, supporting efforts to safely re-open schools around the state during the public health emergency, totaled approximately $9.1 million. We conducted a sample of distributions to subrecipients. Of the 388 distributions, we reviewed 20 to county governments and 20 to schools to determine if the department’s post-award monitoring procedures were effective. The sample was not statistically valid. For 20 of the distributions tested, we determined the department’s monitoring procedures insufficient due to lack of supporting documentation or due to our identification of unallowed costs not identified in the department’s review. Additional details for each county and school distributions follows: Distributions to Counties In fiscal years 2021 and 2022, the department distributed funds to counties as advanced payments. During the prior audit, we reported fiscal year 2021 distributions as questioned costs. In response to our prior audit recommendation, in fiscal year 2023 the department implemented procedures to distribute funds to counties quarterly after the county attested the funds were used in accordance with federal regulations and provided receipts and other documentation for the department’s review and approval. The department also retroactively requested, received, and reviewed support for distributions to counties made in fiscal years 2021 and 2022. As part of our sample, we reviewed four county distributions from fiscal year 2023 and noted department procedures ensured costs incurred were for allowable purposes before distributing federal funds to the county. For the 16 county distributions from fiscal year 2022, we reviewed the department’s tracking spreadsheet and underlying support for four county agreements to determine whether advanced payments from fiscal years 2021 and 2022 were fully utilized. One of the 16 counties had a remaining balance of $54,378 in federal ELC funds for which the county had not incurred or reported expenses against as of June 2024, the month when we reviewed the report. We also considered all data on the department’s tracking spreadsheet and determined as of fiscal year end 2023 eight additional counties had not fully exhausted advanced distributions of federal ELC funds from fiscal year 2022. Of these counties, three had a remaining advanced balance as of June 2024. We consider these outstanding balances totaling $108,800 questioned costs, which is in addition to the $54,378 discussed above. Distributions to Schools School re-opening grants were distributed to schools as lump-sum payments at three different intervals during the audit period. The purpose for these grants was to support school testing, prevention, and mitigation activities intended to support open, in-person school environments during the COVID-19 pandemic. Subsequent to distributing funds to schools, at six-month intervals for fiscal year 2022 awards and at grant close-out for fiscal year 2023 awards, the department required the school to provide support for the use of federal ELC funds. This was documented on a School Budget Expenditure Report. The department required the school to list expenditures by category. Per department guidance, supporting invoices or payroll reports were required only when an individual expense exceeded $5,000. We reviewed documentation provided by the department for the 20 school distributions selected in our sample. In many cases, the documentation provided was intended to support multiple distributions to the schools, not only the distribution selected for sample testing. We identified only one school where supporting documentation was sufficient to conclude federal ELC funds had been fully used for allowable purposes. For the remaining 19 schools, we found: • Supporting documentation for nine schools either did not include support for payroll costs or lacked sufficient detail to support expenditures incurred by the school were for the purpose of the ELC federal program. For seven schools, the payroll reports were dated between November 2023 and April 2024, well after the department’s July 2023 subaward closeout deadline. • One school claimed costs for a school superintendent and a cook, while another school shifted 25% of regular custodial costs to the ELC award for June 2023 salaries. We consider these costs unallowable as they are regular costs associated with school operations and not temporary staff hired or redirected for purposes of school reopening efforts. • Support from schools showed federal ELC funds were spent on items such as ice melt, a kitchen warmer oven, drinking fountains, cameras, printers, paper, toner, and ink. We consider these costs unallowable as they do not align with an allowable cost in the federal school reopening guidance. • One school reported costs totaling $42,761 for Covid-19 testing supplies. Based on our review, the underlying costs were mainly related to purchasing $10 gift cards used to incentivize Covid testing. The school’s incentive plan specified 300 $10 gift cards would be purchased, and distributions of gift cards would be tracked, signed for, and subjected to data analysis to ensure incentives distributed did not outnumber the tests performed. The department did not provide documentation to support its consideration of the discrepancy between expected and actual incentives for the school. Absent additional documentation, we consider the approximately $39,000 unallowable as they are not reasonable or necessary for the performance of the federal award. Per discussion with department personnel, as questions came up in the review of school Budget Expenditures Reports they would reach out to schools for additional documentation or clarification. Turnover in the position responsible for following up with schools contributed to the level of documentation available at the time of audit. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included two findings related to this issue. Finding #2021-062 recommended the department implement internal controls over federal ELC contractor and subrecipient payments and to reimburse those entities only for activities allowed by federal regulations. Finding #2021-054 recommended the department establish and document internal controls for and to conduct monitoring of subrecipients of federal ELC funds. Effect: The department has not complied with federal regulations requiring post-award monitoring of its subrecipients, which means risk exists that federal funds were not expended in accordance with federal award requirements. As part of resolving the issue, the federal government may require the department to repay unallowed or unsupported costs. Cause: Department internal controls in place during the audit period did not consistently include a review and follow-up on subrecipient documentation to support the use of federal ELC funds. • Prior audit findings related to county subrecipients were identified more than half-way through fiscal year 2022. At that time department staff were unaware of the degree of subrecipient monitoring required for subaward agreements. • As discussed in Finding #2023-054, the program staff did not properly identify schools as subrecipients during the audit period. While the department had procedures in place to review subaward close-out documentation submitted by schools, staff turnover contributed to limited follow-up. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Epidemiology and Laboratory Capacity for Infectious Diseases federal award to ensure adequate documentation for subrecipient payments is consistently obtained and reviewed to ensure funds were used for authorized purposes, and documentation of department decisions is maintained. B. Disburse funds to subrecipients for the ELC federal award only for activities allowed by federal regulations. C. Conduct post-award monitoring of subrecipients of federal ELC funds, as required by federal regulations. Views of Responsible Officials: The department conditionally concurs with this recommendation. The department disagrees that funds were not paid to subrecipients for allowable activities. The department acknowledges documentation of their review of costs could be enhanced. However, they believe a large portion of the costs are allowable based on discussions with their federal partners and subrecipients and are confident that additional documentation obtained from the subrecipients would support the questioned costs. Rebuttal of Views of Responsible Officials: We considered the department’s conditional concurrence. It is our position documentation available during the audit period or at the time of audit was not adequate to support that costs were allowable under the program. As such, our recommendation stands.
Finding 2023-055: U.S. Department of Health and Human Services ALN #93.323, Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Grant #Various Criteria: Federal regulation, 2 CFR 200.403(a) and (g), specify costs must be necessary and reasonable for the performance of the federal award and adequately documented to be allowable under federal awards. Federal regulation, 45 CFR 75.352(d), requires the Department of Public Health and Human Services (department) to monitor the activities of its subrecipients as necessary to ensure the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and terms and conditions of the subaward, and subaward performance goals are achieved. Federal guidance from the Centers for Disease Control and Prevention, ELC Reopening Schools: Support for Screening Testing to Reopen & Keep Schools Operating Safely, and related Frequently Asked Questions documents specify allowable costs related to reopening schools. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls were not adequate to ensure subawards of federal ELC funds were expended on allowable costs, as required by federal regulations. Questioned Costs: We question $163,158, which represents the amount of federal funds distributed to counties in fiscal year 2022 that were not supported by actual county expenditures as of June 2024. Additionally, for school subrecipients, we project likely questioned costs of $3,194,292 in federal funds. Questioned costs related to school subrecipients were calculated by applying the percentage of unallowed or unsupported costs identified in our sample to the total amount distributed to schools in the audit period. Context: During the audit period, the department distributed federal ELC funds to 45 county or local governments (county) and to schools in 42 counties. County distributions, supporting localized preparedness for adequate staffing, totaled approximately $4.8 million and were supported by subaward agreements. School distributions, supporting efforts to safely re-open schools around the state during the public health emergency, totaled approximately $9.1 million. We conducted a sample of distributions to subrecipients. Of the 388 distributions, we reviewed 20 to county governments and 20 to schools to determine if the department’s post-award monitoring procedures were effective. The sample was not statistically valid. For 20 of the distributions tested, we determined the department’s monitoring procedures insufficient due to lack of supporting documentation or due to our identification of unallowed costs not identified in the department’s review. Additional details for each county and school distributions follows: Distributions to Counties In fiscal years 2021 and 2022, the department distributed funds to counties as advanced payments. During the prior audit, we reported fiscal year 2021 distributions as questioned costs. In response to our prior audit recommendation, in fiscal year 2023 the department implemented procedures to distribute funds to counties quarterly after the county attested the funds were used in accordance with federal regulations and provided receipts and other documentation for the department’s review and approval. The department also retroactively requested, received, and reviewed support for distributions to counties made in fiscal years 2021 and 2022. As part of our sample, we reviewed four county distributions from fiscal year 2023 and noted department procedures ensured costs incurred were for allowable purposes before distributing federal funds to the county. For the 16 county distributions from fiscal year 2022, we reviewed the department’s tracking spreadsheet and underlying support for four county agreements to determine whether advanced payments from fiscal years 2021 and 2022 were fully utilized. One of the 16 counties had a remaining balance of $54,378 in federal ELC funds for which the county had not incurred or reported expenses against as of June 2024, the month when we reviewed the report. We also considered all data on the department’s tracking spreadsheet and determined as of fiscal year end 2023 eight additional counties had not fully exhausted advanced distributions of federal ELC funds from fiscal year 2022. Of these counties, three had a remaining advanced balance as of June 2024. We consider these outstanding balances totaling $108,800 questioned costs, which is in addition to the $54,378 discussed above. Distributions to Schools School re-opening grants were distributed to schools as lump-sum payments at three different intervals during the audit period. The purpose for these grants was to support school testing, prevention, and mitigation activities intended to support open, in-person school environments during the COVID-19 pandemic. Subsequent to distributing funds to schools, at six-month intervals for fiscal year 2022 awards and at grant close-out for fiscal year 2023 awards, the department required the school to provide support for the use of federal ELC funds. This was documented on a School Budget Expenditure Report. The department required the school to list expenditures by category. Per department guidance, supporting invoices or payroll reports were required only when an individual expense exceeded $5,000. We reviewed documentation provided by the department for the 20 school distributions selected in our sample. In many cases, the documentation provided was intended to support multiple distributions to the schools, not only the distribution selected for sample testing. We identified only one school where supporting documentation was sufficient to conclude federal ELC funds had been fully used for allowable purposes. For the remaining 19 schools, we found: • Supporting documentation for nine schools either did not include support for payroll costs or lacked sufficient detail to support expenditures incurred by the school were for the purpose of the ELC federal program. For seven schools, the payroll reports were dated between November 2023 and April 2024, well after the department’s July 2023 subaward closeout deadline. • One school claimed costs for a school superintendent and a cook, while another school shifted 25% of regular custodial costs to the ELC award for June 2023 salaries. We consider these costs unallowable as they are regular costs associated with school operations and not temporary staff hired or redirected for purposes of school reopening efforts. • Support from schools showed federal ELC funds were spent on items such as ice melt, a kitchen warmer oven, drinking fountains, cameras, printers, paper, toner, and ink. We consider these costs unallowable as they do not align with an allowable cost in the federal school reopening guidance. • One school reported costs totaling $42,761 for Covid-19 testing supplies. Based on our review, the underlying costs were mainly related to purchasing $10 gift cards used to incentivize Covid testing. The school’s incentive plan specified 300 $10 gift cards would be purchased, and distributions of gift cards would be tracked, signed for, and subjected to data analysis to ensure incentives distributed did not outnumber the tests performed. The department did not provide documentation to support its consideration of the discrepancy between expected and actual incentives for the school. Absent additional documentation, we consider the approximately $39,000 unallowable as they are not reasonable or necessary for the performance of the federal award. Per discussion with department personnel, as questions came up in the review of school Budget Expenditures Reports they would reach out to schools for additional documentation or clarification. Turnover in the position responsible for following up with schools contributed to the level of documentation available at the time of audit. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included two findings related to this issue. Finding #2021-062 recommended the department implement internal controls over federal ELC contractor and subrecipient payments and to reimburse those entities only for activities allowed by federal regulations. Finding #2021-054 recommended the department establish and document internal controls for and to conduct monitoring of subrecipients of federal ELC funds. Effect: The department has not complied with federal regulations requiring post-award monitoring of its subrecipients, which means risk exists that federal funds were not expended in accordance with federal award requirements. As part of resolving the issue, the federal government may require the department to repay unallowed or unsupported costs. Cause: Department internal controls in place during the audit period did not consistently include a review and follow-up on subrecipient documentation to support the use of federal ELC funds. • Prior audit findings related to county subrecipients were identified more than half-way through fiscal year 2022. At that time department staff were unaware of the degree of subrecipient monitoring required for subaward agreements. • As discussed in Finding #2023-054, the program staff did not properly identify schools as subrecipients during the audit period. While the department had procedures in place to review subaward close-out documentation submitted by schools, staff turnover contributed to limited follow-up. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Epidemiology and Laboratory Capacity for Infectious Diseases federal award to ensure adequate documentation for subrecipient payments is consistently obtained and reviewed to ensure funds were used for authorized purposes, and documentation of department decisions is maintained. B. Disburse funds to subrecipients for the ELC federal award only for activities allowed by federal regulations. C. Conduct post-award monitoring of subrecipients of federal ELC funds, as required by federal regulations. Views of Responsible Officials: The department conditionally concurs with this recommendation. The department disagrees that funds were not paid to subrecipients for allowable activities. The department acknowledges documentation of their review of costs could be enhanced. However, they believe a large portion of the costs are allowable based on discussions with their federal partners and subrecipients and are confident that additional documentation obtained from the subrecipients would support the questioned costs. Rebuttal of Views of Responsible Officials: We considered the department’s conditional concurrence. It is our position documentation available during the audit period or at the time of audit was not adequate to support that costs were allowable under the program. As such, our recommendation stands.
Finding 2023-055: U.S. Department of Health and Human Services ALN #93.323, Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (COVID-19) Grant #Various Criteria: Federal regulation, 2 CFR 200.403(a) and (g), specify costs must be necessary and reasonable for the performance of the federal award and adequately documented to be allowable under federal awards. Federal regulation, 45 CFR 75.352(d), requires the Department of Public Health and Human Services (department) to monitor the activities of its subrecipients as necessary to ensure the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and terms and conditions of the subaward, and subaward performance goals are achieved. Federal guidance from the Centers for Disease Control and Prevention, ELC Reopening Schools: Support for Screening Testing to Reopen & Keep Schools Operating Safely, and related Frequently Asked Questions documents specify allowable costs related to reopening schools. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls were not adequate to ensure subawards of federal ELC funds were expended on allowable costs, as required by federal regulations. Questioned Costs: We question $163,158, which represents the amount of federal funds distributed to counties in fiscal year 2022 that were not supported by actual county expenditures as of June 2024. Additionally, for school subrecipients, we project likely questioned costs of $3,194,292 in federal funds. Questioned costs related to school subrecipients were calculated by applying the percentage of unallowed or unsupported costs identified in our sample to the total amount distributed to schools in the audit period. Context: During the audit period, the department distributed federal ELC funds to 45 county or local governments (county) and to schools in 42 counties. County distributions, supporting localized preparedness for adequate staffing, totaled approximately $4.8 million and were supported by subaward agreements. School distributions, supporting efforts to safely re-open schools around the state during the public health emergency, totaled approximately $9.1 million. We conducted a sample of distributions to subrecipients. Of the 388 distributions, we reviewed 20 to county governments and 20 to schools to determine if the department’s post-award monitoring procedures were effective. The sample was not statistically valid. For 20 of the distributions tested, we determined the department’s monitoring procedures insufficient due to lack of supporting documentation or due to our identification of unallowed costs not identified in the department’s review. Additional details for each county and school distributions follows: Distributions to Counties In fiscal years 2021 and 2022, the department distributed funds to counties as advanced payments. During the prior audit, we reported fiscal year 2021 distributions as questioned costs. In response to our prior audit recommendation, in fiscal year 2023 the department implemented procedures to distribute funds to counties quarterly after the county attested the funds were used in accordance with federal regulations and provided receipts and other documentation for the department’s review and approval. The department also retroactively requested, received, and reviewed support for distributions to counties made in fiscal years 2021 and 2022. As part of our sample, we reviewed four county distributions from fiscal year 2023 and noted department procedures ensured costs incurred were for allowable purposes before distributing federal funds to the county. For the 16 county distributions from fiscal year 2022, we reviewed the department’s tracking spreadsheet and underlying support for four county agreements to determine whether advanced payments from fiscal years 2021 and 2022 were fully utilized. One of the 16 counties had a remaining balance of $54,378 in federal ELC funds for which the county had not incurred or reported expenses against as of June 2024, the month when we reviewed the report. We also considered all data on the department’s tracking spreadsheet and determined as of fiscal year end 2023 eight additional counties had not fully exhausted advanced distributions of federal ELC funds from fiscal year 2022. Of these counties, three had a remaining advanced balance as of June 2024. We consider these outstanding balances totaling $108,800 questioned costs, which is in addition to the $54,378 discussed above. Distributions to Schools School re-opening grants were distributed to schools as lump-sum payments at three different intervals during the audit period. The purpose for these grants was to support school testing, prevention, and mitigation activities intended to support open, in-person school environments during the COVID-19 pandemic. Subsequent to distributing funds to schools, at six-month intervals for fiscal year 2022 awards and at grant close-out for fiscal year 2023 awards, the department required the school to provide support for the use of federal ELC funds. This was documented on a School Budget Expenditure Report. The department required the school to list expenditures by category. Per department guidance, supporting invoices or payroll reports were required only when an individual expense exceeded $5,000. We reviewed documentation provided by the department for the 20 school distributions selected in our sample. In many cases, the documentation provided was intended to support multiple distributions to the schools, not only the distribution selected for sample testing. We identified only one school where supporting documentation was sufficient to conclude federal ELC funds had been fully used for allowable purposes. For the remaining 19 schools, we found: • Supporting documentation for nine schools either did not include support for payroll costs or lacked sufficient detail to support expenditures incurred by the school were for the purpose of the ELC federal program. For seven schools, the payroll reports were dated between November 2023 and April 2024, well after the department’s July 2023 subaward closeout deadline. • One school claimed costs for a school superintendent and a cook, while another school shifted 25% of regular custodial costs to the ELC award for June 2023 salaries. We consider these costs unallowable as they are regular costs associated with school operations and not temporary staff hired or redirected for purposes of school reopening efforts. • Support from schools showed federal ELC funds were spent on items such as ice melt, a kitchen warmer oven, drinking fountains, cameras, printers, paper, toner, and ink. We consider these costs unallowable as they do not align with an allowable cost in the federal school reopening guidance. • One school reported costs totaling $42,761 for Covid-19 testing supplies. Based on our review, the underlying costs were mainly related to purchasing $10 gift cards used to incentivize Covid testing. The school’s incentive plan specified 300 $10 gift cards would be purchased, and distributions of gift cards would be tracked, signed for, and subjected to data analysis to ensure incentives distributed did not outnumber the tests performed. The department did not provide documentation to support its consideration of the discrepancy between expected and actual incentives for the school. Absent additional documentation, we consider the approximately $39,000 unallowable as they are not reasonable or necessary for the performance of the federal award. Per discussion with department personnel, as questions came up in the review of school Budget Expenditures Reports they would reach out to schools for additional documentation or clarification. Turnover in the position responsible for following up with schools contributed to the level of documentation available at the time of audit. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included two findings related to this issue. Finding #2021-062 recommended the department implement internal controls over federal ELC contractor and subrecipient payments and to reimburse those entities only for activities allowed by federal regulations. Finding #2021-054 recommended the department establish and document internal controls for and to conduct monitoring of subrecipients of federal ELC funds. Effect: The department has not complied with federal regulations requiring post-award monitoring of its subrecipients, which means risk exists that federal funds were not expended in accordance with federal award requirements. As part of resolving the issue, the federal government may require the department to repay unallowed or unsupported costs. Cause: Department internal controls in place during the audit period did not consistently include a review and follow-up on subrecipient documentation to support the use of federal ELC funds. • Prior audit findings related to county subrecipients were identified more than half-way through fiscal year 2022. At that time department staff were unaware of the degree of subrecipient monitoring required for subaward agreements. • As discussed in Finding #2023-054, the program staff did not properly identify schools as subrecipients during the audit period. While the department had procedures in place to review subaward close-out documentation submitted by schools, staff turnover contributed to limited follow-up. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Epidemiology and Laboratory Capacity for Infectious Diseases federal award to ensure adequate documentation for subrecipient payments is consistently obtained and reviewed to ensure funds were used for authorized purposes, and documentation of department decisions is maintained. B. Disburse funds to subrecipients for the ELC federal award only for activities allowed by federal regulations. C. Conduct post-award monitoring of subrecipients of federal ELC funds, as required by federal regulations. Views of Responsible Officials: The department conditionally concurs with this recommendation. The department disagrees that funds were not paid to subrecipients for allowable activities. The department acknowledges documentation of their review of costs could be enhanced. However, they believe a large portion of the costs are allowable based on discussions with their federal partners and subrecipients and are confident that additional documentation obtained from the subrecipients would support the questioned costs. Rebuttal of Views of Responsible Officials: We considered the department’s conditional concurrence. It is our position documentation available during the audit period or at the time of audit was not adequate to support that costs were allowable under the program. As such, our recommendation stands.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-057: U.S. Department of Health and Human Services ALN #93.658, Foster Care – Title IV-E (COVID-19) Grant #2101MTFOST, 2201MTFOST, 2301MTFOST Criteria: Federal regulation, 2 CFR 200.403(a), specifies costs must be necessary and reasonable for the performance of the award. Federal regulation, 2 CFR 200.403(g), specifies costs must be adequately documented to be allowable under the award. Federal regulation, 45 CFR 1356.60(b)(2), requires all training activities and costs funded under Title IV-E be included in the department’s training plan for Title IV-B. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Department of Public Health and Human Services (department) staff did not obtain and review appropriate supporting documentation for payments to subrecipients to ensure costs were necessary and adequately documented as required by federal regulations, indicating internal controls are ineffective. Questioned Costs: Based on transactions reviewed in our sample, we question costs in the amounts of $17,167 as summarized in the table below. The department paid approximately $2.7 million to tribes and universities in fiscal years 2022 and 2023 combined. Based on overall level of activity, likely questioned costs exceed $25,000. See the Schedule of Findings and Questioned Costs for chart/table. Context: The department maintains subrecipient agreements with the seven tribes located within the state and two college/universities (colleges). The department provides federal funds to these entities to either help administer the Foster Care program, provide stipends to college students studying social work, or provide training to department staff. From a sample of 12 invoices from 115 invoices submitted by tribes or colleges, we identified nine cases of unsupported operating expenses and two items lacking wage support. Five of the invoices were related to training costs. The sample was not statistically valid. Inadequate supporting documentation from colleges hindered our ability to determine whether training costs were specified or allowable in the department’s training plan. Our observations of inadequate documentation include: • One college invoice submitted for reimbursement was for $42,344. A general ledger listing the expenses was provided including operating expenses totaling $3,237. These expenses were only listed in the general ledger and not supported by receipts. Without receipts or other support, we were unable to verify whether costs were properly classified as operating expenses on the general ledger and were allowable for reimbursement from federal funds. • Tribal invoices were supported by a general ledger and the department’s standardized billing invoices. The department uses time studies to support the allocation of wages for time spent on a project. Time studies were incomplete or inconsistent with the allocation of wages used in payment to the tribes. Similar to the operating expenses for the colleges, there were no receipts to support the operating expenses from the request for reimbursement. Additionally, from the work performed, we identified nine instances where the IV-E Indirect Costs that subrecipients requested reimbursement for were not properly calculated due to unsupported expenses mentioned above. Also, there was one instance where indirect costs were calculated incorrectly from total expenses, not IV-E allowable expenses. Repeat Finding: Montana’s Single Audit reports for the two fiscal years ended June 30, 2019, and the two fiscal years ended June 30, 2021, included related findings (#2019-017 and #2021-061). These findings recommended the department reimburse subrecipients only for activities allowed by federal regulations and to design and implement internal controls to ensure adequate documentation is obtained, reviewed, and approved prior to payment. Effect: Without adequate supporting documentation, the department cannot demonstrate compliance with internal control requirements in federal regulation. Additionally, for payments that lack adequate support, the department may have incurred costs for unallowable activities under the federal award or for costs that were not reasonable or necessary. Without adequate documentation for training costs, the department cannot demonstrate the activity was in the training plan. As noted in Finding #2023-056, the department does not complete risk assessments of its subrecipients as required. By performing risk assessments, the department may be able to support a different level of payment monitoring and review for lower risk subrecipients. Cause: Overall, the department believes its controls for review of supporting documentation are effective for subrecipient payment activities. Department personnel also noted the federal government only partially sustained the last two audit findings, indicating the department provided additional support to the federal government to support the payments we previously questioned. However, it is unclear to us what additional information was provided and when it was obtained by the department, and the federal grantor agency communicated the importance of retaining adequate documentation. Because we are not responsible for resolving federal findings, we did not review any additional documentation the department provided to the federal government. The support the department provided to us for payments during the current audit does not contain enough detail to confirm the payments were appropriate and necessary for the grant at the time the reimbursements were made. Recommendation: We recommend the Department of Public Health and Human Services: A. Enhance internal controls for its Foster Care federal awards to ensure adequate documentation for subrecipient payments is obtained, reviewed, and approved prior to payment. B. Reimburse Foster Care federal award subrecipients only for activities allowed by federal regulations. Views of Responsible Officials: The department partially concurs with this recommendation. The department represented they enhanced internal controls in fiscal year 2023. They also indicated they started completing risk assessments of subrecipients and believe the subrecipients that have the questioned costs are low risk. Additionally, in fiscal year 2024, the department has requested receipt-level documentation of all questioned costs and believe this documentation indicates costs are allowable activities. Rebuttal of Views of Responsible Officials: We considered the department’s partial concurrence. Based on the documentation reviewed and obtained during the audit period and at the time of audit, it is our position documentation was not adequate to support that costs were allowable under the federal program. As such, our recommendation stands.
Finding 2023-033: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, and S010A200026 - 20A Criteria: Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Title I of the Elementary and Secondary Education Act of 1965, 20 U.S.C. 6303(a)(1), provides that seven percent of the Title I funds received are spent on school improvement. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) identifies schools that need more assistance because of lower performance indicators and designates a portion of its Title I funds for school improvement activities. School improvement expenditures include subawards made to schools and costs incurred by the office to support these targeted schools on a statewide level. The office refers to these programs as “Targeted Support and Improvement” or “Comprehensive Support and Improvement.” We tested 11 high-dollar office purchases that were charged to the school improvement project codes. For three of these transactions, the office was unable to provide documentation supporting its use of statewide school improvement funds. The office’s controls did not ensure sufficient documentation was retained to support the costs being charged to school improvement funds. Questioned Costs: We identified known questioned costs of $5,885, which is the amount of the three expenditure transactions that were not supported. The office spent a total of $2,401,041 in school improvement funds in fiscal years 2022 and 2023. We reviewed $643,841, of which $5,885 were not supported. Based on this, we estimate likely questioned costs exceed $25,000. Context: The unsupported purchases include purchasing a laptop, docking station, and 175 copies of “Driven by Data 2.0: A practical Guide to Improve Instruction”. Documentation is unclear on who the equipment was purchased for, how the books were used or distributed, and why school improvement funds were most appropriate for the purchases. Repeat Finding: Montana’s prior Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-043) to the office to develop internal controls to ensure earmarked funds are spent on allowable activities and improve documentation to support cost allowability, and to comply with earmarking requirements in the prior Single Audit report. Effect: The office is not complying with federal regulations regarding expenses charged to school improvement funds, leading to questioned costs and noncompliance with the requirement to spend seven percent of its funding on school improvement. Cause: Office personnel noted that the laptop and docking station were purchased for the Director of School Improvement and that the books were purchased and distributed to schools identified as Comprehensive Support and Improvement, with only a case of books left at the office for future distribution. However, documentation to support the purpose for purchases was not maintained in sufficient detail to determine is the use of school improvement funds was appropriate. Internal controls for federal programs require documentation of how the funds will be used at the time of purchase. For example, the purchase form for the laptop should explain how the laptop directly benefits schools identified as Targeted or Comprehensive Support and Improvement schools and why the cost is not an administrative or indirect cost. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to ensure the office documents the purpose of school improvement fund expenditures. B. Expend school improvement allocations in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management agrees that the office did not provide sufficient documentation for the transactions in question but is confident that the use of the funds was appropriate. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. As noted above, internal controls for federal programs require documentation of how the funds will be used at the time of purchase, and therefore an internal control deficiency exists even if the use of funds was appropriate. To be allowable, costs must be necessary, reasonable, and adequately documented. As such, our recommendation stands.
Finding 2023-034: U. S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 – 22A, S010A210026 – 21A, and S010A200026 – 20A Criteria: Federal regulation, 2 CFR 200.403(a) and (g), states that costs are allowable when necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.430(i), states salaries and wages charged to a federal award must be based on records that accurately reflect the work performed. Paragraph 430(i)(1)(viii)(A) &(B) allows for budgeted estimates if the estimates produce reasonable approximations of the activity actually performed and significant changes are identified and entered into the records in a timely manner. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction’s (office) controls were not adequate to ensure compliance with federal regulations related to personal service costs. Questioned Costs: We question $1,900,796 in Title I costs, which is the amount of unsupported personal service costs. Context: Office personal service costs were allocated to the Title I program based on a budget in the state’s accounting system that was not supported by a time and effort certification. Office staff do not track time and effort to ensure amounts allocated to the Title I program are supported by actual records that reflect the work performed for the program. The office is allowed to use budget estimates but needs to track actual time to determine if those budget estimates are reasonable approximations of the activity performed. Effect: The office does not have controls to ensure that only allowable costs are allocated to Title I because there is not adequate support to demonstrate personal services costs are allocated to the federal program where work is performed. This resulted in questioned costs of over $1.9 million. Cause: Controls are not in place to require employees to track their time, so time and effort certifications are not completed periodically to ensure time is allocated to the correct programs. Office staff notes that the state’s accounting system is the official time record where employees report their time and supervisors approve and that employees have been directed to record their actual time worked by federal grant. However, five Title I employees reported using estimated percentages when recording their time. In addition, there is no documented control procedure instructing staff to record their actual time in the state’s accounting system. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to ensure personal services costs are adequately documented and reflect actual time and effort for the Title I program. B. Allocate personal service costs based on support for actual time and effort on the Title I program, in accordance with federal regulations. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-033: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, and S010A200026 - 20A Criteria: Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Title I of the Elementary and Secondary Education Act of 1965, 20 U.S.C. 6303(a)(1), provides that seven percent of the Title I funds received are spent on school improvement. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) identifies schools that need more assistance because of lower performance indicators and designates a portion of its Title I funds for school improvement activities. School improvement expenditures include subawards made to schools and costs incurred by the office to support these targeted schools on a statewide level. The office refers to these programs as “Targeted Support and Improvement” or “Comprehensive Support and Improvement.” We tested 11 high-dollar office purchases that were charged to the school improvement project codes. For three of these transactions, the office was unable to provide documentation supporting its use of statewide school improvement funds. The office’s controls did not ensure sufficient documentation was retained to support the costs being charged to school improvement funds. Questioned Costs: We identified known questioned costs of $5,885, which is the amount of the three expenditure transactions that were not supported. The office spent a total of $2,401,041 in school improvement funds in fiscal years 2022 and 2023. We reviewed $643,841, of which $5,885 were not supported. Based on this, we estimate likely questioned costs exceed $25,000. Context: The unsupported purchases include purchasing a laptop, docking station, and 175 copies of “Driven by Data 2.0: A practical Guide to Improve Instruction”. Documentation is unclear on who the equipment was purchased for, how the books were used or distributed, and why school improvement funds were most appropriate for the purchases. Repeat Finding: Montana’s prior Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-043) to the office to develop internal controls to ensure earmarked funds are spent on allowable activities and improve documentation to support cost allowability, and to comply with earmarking requirements in the prior Single Audit report. Effect: The office is not complying with federal regulations regarding expenses charged to school improvement funds, leading to questioned costs and noncompliance with the requirement to spend seven percent of its funding on school improvement. Cause: Office personnel noted that the laptop and docking station were purchased for the Director of School Improvement and that the books were purchased and distributed to schools identified as Comprehensive Support and Improvement, with only a case of books left at the office for future distribution. However, documentation to support the purpose for purchases was not maintained in sufficient detail to determine is the use of school improvement funds was appropriate. Internal controls for federal programs require documentation of how the funds will be used at the time of purchase. For example, the purchase form for the laptop should explain how the laptop directly benefits schools identified as Targeted or Comprehensive Support and Improvement schools and why the cost is not an administrative or indirect cost. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to ensure the office documents the purpose of school improvement fund expenditures. B. Expend school improvement allocations in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management agrees that the office did not provide sufficient documentation for the transactions in question but is confident that the use of the funds was appropriate. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. As noted above, internal controls for federal programs require documentation of how the funds will be used at the time of purchase, and therefore an internal control deficiency exists even if the use of funds was appropriate. To be allowable, costs must be necessary, reasonable, and adequately documented. As such, our recommendation stands.
Finding 2023-034: U. S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 – 22A, S010A210026 – 21A, and S010A200026 – 20A Criteria: Federal regulation, 2 CFR 200.403(a) and (g), states that costs are allowable when necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.430(i), states salaries and wages charged to a federal award must be based on records that accurately reflect the work performed. Paragraph 430(i)(1)(viii)(A) &(B) allows for budgeted estimates if the estimates produce reasonable approximations of the activity actually performed and significant changes are identified and entered into the records in a timely manner. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction’s (office) controls were not adequate to ensure compliance with federal regulations related to personal service costs. Questioned Costs: We question $1,900,796 in Title I costs, which is the amount of unsupported personal service costs. Context: Office personal service costs were allocated to the Title I program based on a budget in the state’s accounting system that was not supported by a time and effort certification. Office staff do not track time and effort to ensure amounts allocated to the Title I program are supported by actual records that reflect the work performed for the program. The office is allowed to use budget estimates but needs to track actual time to determine if those budget estimates are reasonable approximations of the activity performed. Effect: The office does not have controls to ensure that only allowable costs are allocated to Title I because there is not adequate support to demonstrate personal services costs are allocated to the federal program where work is performed. This resulted in questioned costs of over $1.9 million. Cause: Controls are not in place to require employees to track their time, so time and effort certifications are not completed periodically to ensure time is allocated to the correct programs. Office staff notes that the state’s accounting system is the official time record where employees report their time and supervisors approve and that employees have been directed to record their actual time worked by federal grant. However, five Title I employees reported using estimated percentages when recording their time. In addition, there is no documented control procedure instructing staff to record their actual time in the state’s accounting system. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to ensure personal services costs are adequately documented and reflect actual time and effort for the Title I program. B. Allocate personal service costs based on support for actual time and effort on the Title I program, in accordance with federal regulations. Views of Responsible Officials: The office concurs with the recommendation. For additional information regarding the office’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-075: U.S. Department of Homeland Security ALN #97.042 Emergency Management Performance Grants (EMPG) Grant #EMD-2020-EP-00003 ALN #97.047 Pre-Disaster Mitigation (PDM) Grant #EMD-2017-PC-0003 Criteria: Federal regulation, 2 CFR 200.403(g), states costs must be adequately documented in order to be allowable under Federal awards. Condition: The Department of Military Affairs’ (department’s) internal controls were insufficient to obtain and maintain adequate documentation to determine the allowability of sub-recipient expenditures reimbursed as part of its Disaster & Emergency Services (DES) grant programs. We noted the following errors: • Emergency Management Performance Grants (EMPG) o Salaries and benefits were approved without adequate documentation to indicate which employee’s time was being reimbursed. • Pre-Disaster Mitigation (PDM) o Documentation was missing from the Federal Emergency Management Assistance (FEMA) for the approval of the purchase of unimproved property and first responder training. o Volunteer rates were used rather than actual employee salary costs. o The use of equipment without documentation of what the equipment was used for or the basis for the rate charged. Questioned Costs: For the errors outlined above, we identified the following questioned costs: • 97.042 Emergency Management Performance Grants (EMPG) o Identified Questioned Costs: $32,702.15 • 97.047 Pre-Disaster Mitigation (PDM) o Identified Questioned Costs: $58,056.12 Context: We completed a sample over four types of grants. The chart below indicates the grant, population, number tested, number of errors, and type of sample for the grant types where we found questioned costs greater than $25,000. The sample was not statistically valid. See the Schedule of Findings and Questioned Costs for chart/table. Repeat Finding: This is a repeat finding, initially reported as 2017-011 in the Single Audit report for the two fiscal years ended June 30, 2017. It was reported as finding 2019-028 in the Single Audit report for the two fiscal years ended June 30, 2019. It was reported as finding 2021-015 in the Single Audit report for the two fiscal years ended June 30, 2021, but was limited to EMPG grants only. While the current audit identified actual or projected questioned costs in excessive of $25,000, the number of instances we found was considerably less than found in prior audits. Given neither the EMPG nor PDM programs are major federal programs, our reporting this Single Audit is only driven by the questioned costs outlined above, and we have not made internal controls an element of the finding in the current audit. Effect: Without sufficient internal controls to obtain and maintain adequate documentation of subrecipient expenditures, the department may not comply with federal regulations and could reimburse unallowable expenditures. As noted above, we identified questioned costs in excess of $25,000 for two grant programs. Cause: The department required documentation from the subrecipients to support the expenditures, but internal controls were not adequate to ensure those documents contained adequate details required to make allowability determinations. Additionally, the department indicated that the federal government approved certain costs, but the documentation was not obtained or retained to demonstrate that approval. The questioned costs for EMPG were for the time period prior to new procedures that were put in place to address a prior audit recommendation. Recommendation: We recommend the Department of Military Affairs comply with federal requirements by ensuring subrecipient reimbursements are supported and allowable under the grant awards at the time the reimbursement is made. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-075: U.S. Department of Homeland Security ALN #97.042 Emergency Management Performance Grants (EMPG) Grant #EMD-2020-EP-00003 ALN #97.047 Pre-Disaster Mitigation (PDM) Grant #EMD-2017-PC-0003 Criteria: Federal regulation, 2 CFR 200.403(g), states costs must be adequately documented in order to be allowable under Federal awards. Condition: The Department of Military Affairs’ (department’s) internal controls were insufficient to obtain and maintain adequate documentation to determine the allowability of sub-recipient expenditures reimbursed as part of its Disaster & Emergency Services (DES) grant programs. We noted the following errors: • Emergency Management Performance Grants (EMPG) o Salaries and benefits were approved without adequate documentation to indicate which employee’s time was being reimbursed. • Pre-Disaster Mitigation (PDM) o Documentation was missing from the Federal Emergency Management Assistance (FEMA) for the approval of the purchase of unimproved property and first responder training. o Volunteer rates were used rather than actual employee salary costs. o The use of equipment without documentation of what the equipment was used for or the basis for the rate charged. Questioned Costs: For the errors outlined above, we identified the following questioned costs: • 97.042 Emergency Management Performance Grants (EMPG) o Identified Questioned Costs: $32,702.15 • 97.047 Pre-Disaster Mitigation (PDM) o Identified Questioned Costs: $58,056.12 Context: We completed a sample over four types of grants. The chart below indicates the grant, population, number tested, number of errors, and type of sample for the grant types where we found questioned costs greater than $25,000. The sample was not statistically valid. See the Schedule of Findings and Questioned Costs for chart/table. Repeat Finding: This is a repeat finding, initially reported as 2017-011 in the Single Audit report for the two fiscal years ended June 30, 2017. It was reported as finding 2019-028 in the Single Audit report for the two fiscal years ended June 30, 2019. It was reported as finding 2021-015 in the Single Audit report for the two fiscal years ended June 30, 2021, but was limited to EMPG grants only. While the current audit identified actual or projected questioned costs in excessive of $25,000, the number of instances we found was considerably less than found in prior audits. Given neither the EMPG nor PDM programs are major federal programs, our reporting this Single Audit is only driven by the questioned costs outlined above, and we have not made internal controls an element of the finding in the current audit. Effect: Without sufficient internal controls to obtain and maintain adequate documentation of subrecipient expenditures, the department may not comply with federal regulations and could reimburse unallowable expenditures. As noted above, we identified questioned costs in excess of $25,000 for two grant programs. Cause: The department required documentation from the subrecipients to support the expenditures, but internal controls were not adequate to ensure those documents contained adequate details required to make allowability determinations. Additionally, the department indicated that the federal government approved certain costs, but the documentation was not obtained or retained to demonstrate that approval. The questioned costs for EMPG were for the time period prior to new procedures that were put in place to address a prior audit recommendation. Recommendation: We recommend the Department of Military Affairs comply with federal requirements by ensuring subrecipient reimbursements are supported and allowable under the grant awards at the time the reimbursement is made. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-075: U.S. Department of Homeland Security ALN #97.042 Emergency Management Performance Grants (EMPG) Grant #EMD-2020-EP-00003 ALN #97.047 Pre-Disaster Mitigation (PDM) Grant #EMD-2017-PC-0003 Criteria: Federal regulation, 2 CFR 200.403(g), states costs must be adequately documented in order to be allowable under Federal awards. Condition: The Department of Military Affairs’ (department’s) internal controls were insufficient to obtain and maintain adequate documentation to determine the allowability of sub-recipient expenditures reimbursed as part of its Disaster & Emergency Services (DES) grant programs. We noted the following errors: • Emergency Management Performance Grants (EMPG) o Salaries and benefits were approved without adequate documentation to indicate which employee’s time was being reimbursed. • Pre-Disaster Mitigation (PDM) o Documentation was missing from the Federal Emergency Management Assistance (FEMA) for the approval of the purchase of unimproved property and first responder training. o Volunteer rates were used rather than actual employee salary costs. o The use of equipment without documentation of what the equipment was used for or the basis for the rate charged. Questioned Costs: For the errors outlined above, we identified the following questioned costs: • 97.042 Emergency Management Performance Grants (EMPG) o Identified Questioned Costs: $32,702.15 • 97.047 Pre-Disaster Mitigation (PDM) o Identified Questioned Costs: $58,056.12 Context: We completed a sample over four types of grants. The chart below indicates the grant, population, number tested, number of errors, and type of sample for the grant types where we found questioned costs greater than $25,000. The sample was not statistically valid. See the Schedule of Findings and Questioned Costs for chart/table. Repeat Finding: This is a repeat finding, initially reported as 2017-011 in the Single Audit report for the two fiscal years ended June 30, 2017. It was reported as finding 2019-028 in the Single Audit report for the two fiscal years ended June 30, 2019. It was reported as finding 2021-015 in the Single Audit report for the two fiscal years ended June 30, 2021, but was limited to EMPG grants only. While the current audit identified actual or projected questioned costs in excessive of $25,000, the number of instances we found was considerably less than found in prior audits. Given neither the EMPG nor PDM programs are major federal programs, our reporting this Single Audit is only driven by the questioned costs outlined above, and we have not made internal controls an element of the finding in the current audit. Effect: Without sufficient internal controls to obtain and maintain adequate documentation of subrecipient expenditures, the department may not comply with federal regulations and could reimburse unallowable expenditures. As noted above, we identified questioned costs in excess of $25,000 for two grant programs. Cause: The department required documentation from the subrecipients to support the expenditures, but internal controls were not adequate to ensure those documents contained adequate details required to make allowability determinations. Additionally, the department indicated that the federal government approved certain costs, but the documentation was not obtained or retained to demonstrate that approval. The questioned costs for EMPG were for the time period prior to new procedures that were put in place to address a prior audit recommendation. Recommendation: We recommend the Department of Military Affairs comply with federal requirements by ensuring subrecipient reimbursements are supported and allowable under the grant awards at the time the reimbursement is made. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-075: U.S. Department of Homeland Security ALN #97.042 Emergency Management Performance Grants (EMPG) Grant #EMD-2020-EP-00003 ALN #97.047 Pre-Disaster Mitigation (PDM) Grant #EMD-2017-PC-0003 Criteria: Federal regulation, 2 CFR 200.403(g), states costs must be adequately documented in order to be allowable under Federal awards. Condition: The Department of Military Affairs’ (department’s) internal controls were insufficient to obtain and maintain adequate documentation to determine the allowability of sub-recipient expenditures reimbursed as part of its Disaster & Emergency Services (DES) grant programs. We noted the following errors: • Emergency Management Performance Grants (EMPG) o Salaries and benefits were approved without adequate documentation to indicate which employee’s time was being reimbursed. • Pre-Disaster Mitigation (PDM) o Documentation was missing from the Federal Emergency Management Assistance (FEMA) for the approval of the purchase of unimproved property and first responder training. o Volunteer rates were used rather than actual employee salary costs. o The use of equipment without documentation of what the equipment was used for or the basis for the rate charged. Questioned Costs: For the errors outlined above, we identified the following questioned costs: • 97.042 Emergency Management Performance Grants (EMPG) o Identified Questioned Costs: $32,702.15 • 97.047 Pre-Disaster Mitigation (PDM) o Identified Questioned Costs: $58,056.12 Context: We completed a sample over four types of grants. The chart below indicates the grant, population, number tested, number of errors, and type of sample for the grant types where we found questioned costs greater than $25,000. The sample was not statistically valid. See the Schedule of Findings and Questioned Costs for chart/table. Repeat Finding: This is a repeat finding, initially reported as 2017-011 in the Single Audit report for the two fiscal years ended June 30, 2017. It was reported as finding 2019-028 in the Single Audit report for the two fiscal years ended June 30, 2019. It was reported as finding 2021-015 in the Single Audit report for the two fiscal years ended June 30, 2021, but was limited to EMPG grants only. While the current audit identified actual or projected questioned costs in excessive of $25,000, the number of instances we found was considerably less than found in prior audits. Given neither the EMPG nor PDM programs are major federal programs, our reporting this Single Audit is only driven by the questioned costs outlined above, and we have not made internal controls an element of the finding in the current audit. Effect: Without sufficient internal controls to obtain and maintain adequate documentation of subrecipient expenditures, the department may not comply with federal regulations and could reimburse unallowable expenditures. As noted above, we identified questioned costs in excess of $25,000 for two grant programs. Cause: The department required documentation from the subrecipients to support the expenditures, but internal controls were not adequate to ensure those documents contained adequate details required to make allowability determinations. Additionally, the department indicated that the federal government approved certain costs, but the documentation was not obtained or retained to demonstrate that approval. The questioned costs for EMPG were for the time period prior to new procedures that were put in place to address a prior audit recommendation. Recommendation: We recommend the Department of Military Affairs comply with federal requirements by ensuring subrecipient reimbursements are supported and allowable under the grant awards at the time the reimbursement is made. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-075: U.S. Department of Homeland Security ALN #97.042 Emergency Management Performance Grants (EMPG) Grant #EMD-2020-EP-00003 ALN #97.047 Pre-Disaster Mitigation (PDM) Grant #EMD-2017-PC-0003 Criteria: Federal regulation, 2 CFR 200.403(g), states costs must be adequately documented in order to be allowable under Federal awards. Condition: The Department of Military Affairs’ (department’s) internal controls were insufficient to obtain and maintain adequate documentation to determine the allowability of sub-recipient expenditures reimbursed as part of its Disaster & Emergency Services (DES) grant programs. We noted the following errors: • Emergency Management Performance Grants (EMPG) o Salaries and benefits were approved without adequate documentation to indicate which employee’s time was being reimbursed. • Pre-Disaster Mitigation (PDM) o Documentation was missing from the Federal Emergency Management Assistance (FEMA) for the approval of the purchase of unimproved property and first responder training. o Volunteer rates were used rather than actual employee salary costs. o The use of equipment without documentation of what the equipment was used for or the basis for the rate charged. Questioned Costs: For the errors outlined above, we identified the following questioned costs: • 97.042 Emergency Management Performance Grants (EMPG) o Identified Questioned Costs: $32,702.15 • 97.047 Pre-Disaster Mitigation (PDM) o Identified Questioned Costs: $58,056.12 Context: We completed a sample over four types of grants. The chart below indicates the grant, population, number tested, number of errors, and type of sample for the grant types where we found questioned costs greater than $25,000. The sample was not statistically valid. See the Schedule of Findings and Questioned Costs for chart/table. Repeat Finding: This is a repeat finding, initially reported as 2017-011 in the Single Audit report for the two fiscal years ended June 30, 2017. It was reported as finding 2019-028 in the Single Audit report for the two fiscal years ended June 30, 2019. It was reported as finding 2021-015 in the Single Audit report for the two fiscal years ended June 30, 2021, but was limited to EMPG grants only. While the current audit identified actual or projected questioned costs in excessive of $25,000, the number of instances we found was considerably less than found in prior audits. Given neither the EMPG nor PDM programs are major federal programs, our reporting this Single Audit is only driven by the questioned costs outlined above, and we have not made internal controls an element of the finding in the current audit. Effect: Without sufficient internal controls to obtain and maintain adequate documentation of subrecipient expenditures, the department may not comply with federal regulations and could reimburse unallowable expenditures. As noted above, we identified questioned costs in excess of $25,000 for two grant programs. Cause: The department required documentation from the subrecipients to support the expenditures, but internal controls were not adequate to ensure those documents contained adequate details required to make allowability determinations. Additionally, the department indicated that the federal government approved certain costs, but the documentation was not obtained or retained to demonstrate that approval. The questioned costs for EMPG were for the time period prior to new procedures that were put in place to address a prior audit recommendation. Recommendation: We recommend the Department of Military Affairs comply with federal requirements by ensuring subrecipient reimbursements are supported and allowable under the grant awards at the time the reimbursement is made. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
Finding 2023-038: U.S. Department of Education ALN #84.010, Title I Grants to Local Educational Agencies (Title I) Grant #S010A220026 - 22A, S010A210026 - 21A, S010A200026 - 20A ALN #84.367, Supporting Effective Instruction State Grants (Title II) Grant #S367A220025, S367A210025, S367A200025 ALN #84.365, English Language Acquisition State Grants (Title III) Grant #S365A22002, S365A20002 ALN #84.424 Student Support and Academic Enrichment Program (Title IV) Grant #S424A200027 Criteria: Federal regulation, 2 CFR 200.332(d), requires pass-through entities to "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved." Federal regulation, 2 CFR 200.403(a) and (g), states costs are allowable when they are necessary and reasonable for the performance of the federal award and adequately documented. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Office of Public Instruction (office) reimbursed Local Educational Agencies (LEAs) without receiving sufficiently detailed documentation to determine whether the LEAs were seeking reimbursement for allowed activities or allowable costs. Internal controls were not adequate to ensure proper documentation is received from the LEAs before making a reimbursement. We also addressed incomplete subrecipient monitoring in finding number 2023-035. Questioned Costs: We question $5,943,419 in Title I payments that were reimbursed without adequate support. This amount represents the errors found in eight out of ten tested sample items. Given a total population of $102,446,866, we estimate likely questioned costs exceed $25 million for the Title I program. Additionally, we question $523,706 in Title II costs, $66,040 in Title III costs, and $73,152 in Title IV costs, as these were part of the same subrecipient cash requests reviewed for the Title I program. Context: The major federal program we tested was Title I. The objective of the program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. We designed a sample to test 60 items out of a population of 4,214 reimbursements. This sample was not statistically valid. We tested the first 10 sample items and found inadequate documentation for eight. We considered this material noncompliance and did not test the remaining 50 items. We noted the following exceptions: • One closeout cash request for $62,795 included no documentation to indicate what costs the LEA incurred. • Most cash requests for salary and fringe benefits lacked the names of individuals compensated, the roles/titles of personnel, and the dates associated with the compensation. • Documentation did not provide enough detail to discern whether costs were necessary for or related to the Title I program. • One cash request included supplies of $146,646, including food purchases for pizza, although the office’s own monitoring tool indicates, “Activities offered using Title I funds must provide information to or build the capacity of parents and families to support their child’s academic achievement. Open houses, Muffin/Donut days, BBQs, or other meet-and-greet activities are unacceptable.” We cannot tell how much was spent on pizza because it was combined with other items. Office approval is typically limited to comparing the approved budget categories on the Grant Application Notification (GAN) to the budget categories on the LEA’s cash request. Title I is part of the Elementary and Secondary Education Act (ESEA). Federal regulations allow states to accept consolidated applications for all titles included under ESEA. The office accepts consolidated applications from the school districts. Under the ESEA consolidated application, school districts are able to submit a schoolwide cash request for all federal titles included under their consolidated application. In our review, we identified eight questioned cash requests, six were for schoolwide cash requests. While Title II, Title III and Title IV were not major federal programs, the known questioned costs for these three programs exceeded the federal reporting threshold. Effect: The office reimbursed LEAs for Title I costs that were not adequately supported at the time of reimbursement. This increases the risk that LEAs used Title I funds for unallowable activities or unallowed costs. Finally, subrecipient monitoring procedures were not sufficient to comply with federal regulations. Cause: Office staff believe they are requesting sufficient documentation, and they said the cash requests and applications contain all the information for office staff to be confident in the expenditures. Office staff also note that they can request more information from LEAs if there is something they are not confident about. They point out that LEAs receive annual independent audits and the office must depend on the accuracy and reliability of those audit processes and reports. However, based on office documentation, less than 17 percent of Title I LEAs get an audit with federal compliance testing. In addition, federal regulations require more subrecipient monitoring than reviewing audit reports, and we found noncompliance with the office’s other subrecipient monitoring procedures during the audit period. Recommendation: We recommend the Office of Public Instruction: A. Implement internal controls to require LEAs to submit adequate documentation with reimbursement requests. B. Only reimburse LEAs for expenditures when their documentation is sufficient to determine if the costs are allowable to the program, in accordance with federal regulations. Views of Responsible Officials: The office partially concurs with the recommendation. Management notes that they increased the documentation requirements for cash requests at the end of the first year of the audit period. LEAs are required to maintain all receipts and provide them upon request. Management also notes no request for additional LEA documentation was included as part of this audit process. Rebuttal of Views of Responsible Officials: We considered the office’s partial concurrence. Cash requests from both years of the audit period were tested, and instances of insufficient documentation were found throughout the audit period. While we are not prohibited from requesting subrecipients’ documentation during an audit, we are not required to do so. It is our position that unless the office maintains this documentation or documents their monitoring activities, compliance with the requirements applicable to the office cannot be demonstrated. As such, our recommendation stands.
FA 2023-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Award Numbers: 235GA324N1199 (Year: 2023), 225GA324N1099 (Year: 2023) Questioned Costs: $3,381 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating appropriately to ensure that expenditures were reviewed and approved and that the School District’s procurement and suspension and debarment procedures were followed. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $1,981,179 were expended and reported on the Berrien County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: A sample of 40 expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For 12 expenditures, evidence of review and approval was not reflected within the voucher package. • Two expenditures were not recorded in the correct fiscal year. Additionally, auditor reviewed 38 of these same expenditures to determine if procurement transactions complied with the School District’s procurement procedures and proper oversight was maintained to ensure that contractors were performing according to their contracts. The following deficiency was noted: • The School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for three small purchase expenditures reviewed. Questioned Cost: Upon testing a sample of $73,322 in procurement transactions services expenditures, known questioned costs of $3,381 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $1,341,865 in procurement transactions, we project the likely questioned costs to be approximately $61,878. Cause: When discussing the issues noted with management, they stated that the new Director was unaware of these federal requirements. She did not maintain adequate documents due to being new in her position. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance related to the Child Nutrition Cluster. Failure to ensure that expenditures are appropriately approved and procedures to address procurement and suspension and debarment compliance requirements are implemented exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds for unallowable purposes and/or with unqualified vendors. In addition, this deficiency could lead to the return of funding associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the Child Nutrition Cluster. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review and approval, required procurement methods are properly identified and followed, and required procurement and suspension and debarment documentation is properly identified, safeguarded, and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with this finding.
FA 2023-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Award Numbers: 235GA324N1199 (Year: 2023), 225GA324N1099 (Year: 2023) Questioned Costs: $3,381 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating appropriately to ensure that expenditures were reviewed and approved and that the School District’s procurement and suspension and debarment procedures were followed. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $1,981,179 were expended and reported on the Berrien County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: A sample of 40 expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For 12 expenditures, evidence of review and approval was not reflected within the voucher package. • Two expenditures were not recorded in the correct fiscal year. Additionally, auditor reviewed 38 of these same expenditures to determine if procurement transactions complied with the School District’s procurement procedures and proper oversight was maintained to ensure that contractors were performing according to their contracts. The following deficiency was noted: • The School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for three small purchase expenditures reviewed. Questioned Cost: Upon testing a sample of $73,322 in procurement transactions services expenditures, known questioned costs of $3,381 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $1,341,865 in procurement transactions, we project the likely questioned costs to be approximately $61,878. Cause: When discussing the issues noted with management, they stated that the new Director was unaware of these federal requirements. She did not maintain adequate documents due to being new in her position. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance related to the Child Nutrition Cluster. Failure to ensure that expenditures are appropriately approved and procedures to address procurement and suspension and debarment compliance requirements are implemented exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds for unallowable purposes and/or with unqualified vendors. In addition, this deficiency could lead to the return of funding associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the Child Nutrition Cluster. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review and approval, required procurement methods are properly identified and followed, and required procurement and suspension and debarment documentation is properly identified, safeguarded, and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with this finding.
Compliance and Significant Deficiency in Internal Control over compliance with Activities Allowed or Unallowed, Allowable Cost/Cost Principles U.S. Department of Education Passed through NYS Department of Education Program Name: Education Stabilization Fund AL#: 84.425D Condition: Payroll and fringe benefits were charged to the ESSER 2 grant in excess of the amount allocable for services performed in the program. Criteria: As a recipient of federal awards, the District is required to establish and maintain effective internal controls over federal awards in accordance with 2CFR Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Section 200.303 – Internal Controls. Provisions included in section 200.403 – Factors Affecting Allowability of Costs states that 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.(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) 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.(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.(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. (h) Cost must be incurred during the approved budget period. Context: Our audit of payroll service by individual employee charged to the ESSER 2 grant found that a journal entry had been made to equal the budgeted amount of payroll which was in excess of the actual expenditures. Questioned costs are $24,289 in direct payroll and $14,341 in related fringe benefits. Cause: The District did not have sufficient internal controls in place to ensure that the recorded amounts were adequately documented and reconciled by individual employees working in the program. Effect: The District is not in compliance with the requirements of the Education Stabilization Fund program with respect to Activities Allowed or Unallowed and Allowable Costs. Recommendation: We recommend that the District’s written procedures addressing internal controls with respect to program requirements be followed to ensure the District is in compliance at all times. View of Responsible Officials: Highland Falls-Fort Montgomery Central School District’s management concurs with this finding. The District is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 12 – 13.
Compliance and Significant Deficiency in Internal Control over compliance with Activities Allowed or Unallowed, Allowable Cost/Cost Principles U.S. Department of Education Passed through NYS Department of Education Program Name: Education Stabilization Fund AL#: 84.425U Condition: In accordance with C.R. 170.2 of the Commissioner’s Regulations, the District requires Purchase Orders to be established to encumber the approved budget items for each expenditure code. The complete bill packet including the Purchase Order, receiving slip, and invoice is submitted for authorization of payment. For the ARP Learning Loss Grant, Purchase Orders were created after the dates of service. Criteria: As a recipient of federal awards, the District is required to establish and maintain effective internal controls over federal awards in accordance with 2CFR Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Section 200.303 – Internal Controls. Provisions included in section 200.403 – Factors Affecting Allowability of Costs states that 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.(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) 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.(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.(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. (h) Cost must be incurred during the approved budget period. Context: 4 items from a total population of 7 were selected for testing. A Purchase Order was initiated on 11//10/22 for an event that occurred on 8/31/22. Questioned Costs are $4,100. A purchase order dated 1/27/23 included an event that had occurred on 11/16/22. Questioned Costs are $1,750. Cause: The District did not have sufficient internal controls in place to ensure that Purchase Orders are created in accordance C.R. 170.2 of the Commissioner’s Regulations. When the invoices were received, a Purchase Order was required to be able to pay the vendor. Effect: The District is not in compliance with the requirements of the Education Stabilization Fund program with respect to Activities Allowed or Unallowed and Allowable Costs. Recommendation: We recommend that the District’s written procedures addressing internal controls with respect to program requirements be followed to ensure the District is in compliance at all times. View of Responsible Officials: Highland Falls-Fort Montgomery Central School District’s management concurs with this finding. The District is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 12 – 13.
2023-019 ALLOWABLE COSTS AND COST PRINCIPLES - ESSER 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 #: 84.425D and 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52110 and 52160 Pass-through Agency: WV Department of Education CONDITION: The Monroe County Board of Education (the “Board”) did not comply with the allowable costs/cost principle related to the ESSER grant. Several expenditures to the ESSER had supporting documentation which did not agree to the costs charged to the grant. CONTEXT: 51 non-payroll expenditures were sampled from a population of 134 for ESSER, of which: Three expenditures, or 6% of the sample size, did not agree with the charges recorded to the grant. CRITERIA: According to Title 2 CFR Part 200.403(g), Uniform Guidance, for costs to be allowable under federal awards, they must be adequately documented, and must align with the purposes of the grant. The Board is required to maintain accurate and complete records to support that expenditures are reasonable, necessary, and allocable to the grant. QUESTIONED COSTS: None. Actual and likely questioned costs are below $25,000 and program materiality. CAUSE: The noncompliance occurred due to insufficient review processes and oversight of expenditures charged to the grant. The Board’s current internal controls were not effective in ensuring that all costs met the allowable costs/cost principles criteria. EFFECT: Although the actual and likely costs are below $25,000 and do not exceed program materiality, charging costs to the program that do not agree with supporting documentation may result in the disallowance of the questioned costs by the federal grantor agency. This could lead to financial liabilities for the Board and potentially jeopardize future federal funding. REPEAT FINDING: No RECOMMENDATION: We recommend that the Board strengthen its internal controls over the review and approval of expenditures charged to federal grants. This should include ensuring that all expenditures are adequately documented and that they align with the purposes of the grant. Training should be provided to relevant staff on the requirements of Title 2 CFR Part 200.403 to prevent future occurrences of this finding. VIEWS OF RESPONSIBLE OFFICIALS: The Board acknowledges the finding and agrees with the recommendation and is committed to improving its internal controls to ensure compliance with federal regulations.
Finding number: 2023 011 Federal agency: U.S. Department of Education Pass through agency: Commonwealth Department of Elementary and Secondary Education Program: Special Education (IDEA) Cluster ALN #: 84.027; 84.173 Award number: 240 532934 2022 0035; 240 714716 2023 0035 Award year: August 23, 2021 to September 30, 2024 Finding: Internal Control over Payroll Costs and Period of Performance Prior Year Finding: No Type of Finding: Material Weakness Criteria Allowable Costs – Payroll In accordance with 2 CFR 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both Federally assisted and all other activities compensated by the non Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non Federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non Federal entity; and (vi) 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; a Federal award and non Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Period of Performance A non federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass through entity made the federal award that were authorized by the federal awarding agency or pass through entity (2 CFR sections 200.308, 200.309, and 200.403(h)). A period of performance may contain one or more budget periods. LEAs and SEAs must obligate funds during the 27 months, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. This maximum period includes a 15 month period of initial availability plus a 12 month period for carryover. Additionally, 2 CFR 200.303 indicates that non Federal entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition During our testing of allowable costs and period of performance associated with payroll charges, we noted that the City of Boston Public Schools (BPS) documents time and attendance of employees on daily timesheets signed by the employee, and that these timesheets are approved by the Department Head/Supervisor on a Department Time Summary Report (DTSR). However, for 39 of our sample of 40 payroll transactions charged to the program, we noted that the DTSR was either not located or not approved by the Department Head/Supervisor. Cause This appears to be due to the insufficient retention and documentation over the review and approval of payroll charges. Effect Insufficient review of payroll documentation increases the risk of inaccurate payroll costs being allocated to a grant award. Whether Sampling was Statistically Valid The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: None Recommendation We recommend that BPS re enforce its policies and procedures to ensure their review of payroll changes via signoff on the Department Time Summary is appropriately documented and records are retained. View of Responsible Officials from the Auditee BPS has updated DTSR training and guidance for timekeepers to ensure that any similar technical issues are addressed quickly and manually adjusted if needed. Training was given in August 2024.
Finding number: 2023 011 Federal agency: U.S. Department of Education Pass through agency: Commonwealth Department of Elementary and Secondary Education Program: Special Education (IDEA) Cluster ALN #: 84.027; 84.173 Award number: 240 532934 2022 0035; 240 714716 2023 0035 Award year: August 23, 2021 to September 30, 2024 Finding: Internal Control over Payroll Costs and Period of Performance Prior Year Finding: No Type of Finding: Material Weakness Criteria Allowable Costs – Payroll In accordance with 2 CFR 200.430(i)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both Federally assisted and all other activities compensated by the non Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non Federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non Federal entity; and (vi) 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; a Federal award and non Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Period of Performance A non federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass through entity made the federal award that were authorized by the federal awarding agency or pass through entity (2 CFR sections 200.308, 200.309, and 200.403(h)). A period of performance may contain one or more budget periods. LEAs and SEAs must obligate funds during the 27 months, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. This maximum period includes a 15 month period of initial availability plus a 12 month period for carryover. Additionally, 2 CFR 200.303 indicates that non Federal entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition During our testing of allowable costs and period of performance associated with payroll charges, we noted that the City of Boston Public Schools (BPS) documents time and attendance of employees on daily timesheets signed by the employee, and that these timesheets are approved by the Department Head/Supervisor on a Department Time Summary Report (DTSR). However, for 39 of our sample of 40 payroll transactions charged to the program, we noted that the DTSR was either not located or not approved by the Department Head/Supervisor. Cause This appears to be due to the insufficient retention and documentation over the review and approval of payroll charges. Effect Insufficient review of payroll documentation increases the risk of inaccurate payroll costs being allocated to a grant award. Whether Sampling was Statistically Valid The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: None Recommendation We recommend that BPS re enforce its policies and procedures to ensure their review of payroll changes via signoff on the Department Time Summary is appropriately documented and records are retained. View of Responsible Officials from the Auditee BPS has updated DTSR training and guidance for timekeepers to ensure that any similar technical issues are addressed quickly and manually adjusted if needed. Training was given in August 2024.
Condition -The Municipality’s staff could not provide us with the officially prepared and certified reports that supported compliance with the filing or submission of reports and financial information, as required by federal award and regulatory agreements. Likewise, reconciliations were not provided between the information used to prepare the required and submitted reports with the formal information presented and accounted for in the official Municipality’s accounting system. Criteria - The state is required to make an accounting to FEMA of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the FEMA-State Agreement, all grants conditions were met, ant the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’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 permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of knowledge and training to the personnel assigned to the management and reports preparation, as required by this federal award. Additionally, the Municipality does not have an adequate monitoring and internal control regarding the activity, filing and custody of reports, as required by the federal awards and the pass-through entity, and in a way that documents and supports the compliance with reporting requirements. Effect - The program is exposed to not being in compliance with the Reporting Requirements as established in agreement. Also, the Municipality is exposed to the Grantor questioning the use of funds. Recommendation - We recommend that the staff or department in charge locate and document all required reports that were filed according to the requirements of the grant agreement, including the reconciliation thereof with the official Municipality’s accounting subsidiaries. Also, it is absolutely necessary for the Municipality to design, document, establish and provide the necessary and required training, including guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds. Questioned Costs - None
Condition -The Municipality’s staff could not provide us with the officially prepared and certified reports that supported compliance with the filing or submission of reports and financial information, as required by federal award and regulatory agreements. Likewise, reconciliations were not provided between the information used to prepare the required and submitted reports with the formal information presented and accounted for in the official Municipality’s accounting system. Criteria - The state is required to make an accounting to FEMA of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the FEMA-State Agreement, all grants conditions were met, ant the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’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 permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of knowledge and training to the personnel assigned to the management and reports preparation, as required by this federal award. Additionally, the Municipality does not have an adequate monitoring and internal control regarding the activity, filing and custody of reports, as required by the federal awards and the pass-through entity, and in a way that documents and supports the compliance with reporting requirements. Effect - The program is exposed to not being in compliance with the Reporting Requirements as established in agreement. Also, the Municipality is exposed to the Grantor questioning the use of funds. Recommendation - We recommend that the staff or department in charge locate and document all required reports that were filed according to the requirements of the grant agreement, including the reconciliation thereof with the official Municipality’s accounting subsidiaries. Also, it is absolutely necessary for the Municipality to design, document, establish and provide the necessary and required training, including guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds. Questioned Costs - None
Condition -The Municipality’s staff could not provide us with the officially prepared and certified reports that supported compliance with the filing or submission of reports and financial information, as required by federal award and regulatory agreements. Likewise, reconciliations were not provided between the information used to prepare the required and submitted reports with the formal information presented and accounted for in the official Municipality’s accounting system. Criteria - The state is required to make an accounting to FEMA of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the FEMA-State Agreement, all grants conditions were met, ant the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’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 permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of knowledge and training to the personnel assigned to the management and reports preparation, as required by this federal award. Additionally, the Municipality does not have an adequate monitoring and internal control regarding the activity, filing and custody of reports, as required by the federal awards and the pass-through entity, and in a way that documents and supports the compliance with reporting requirements. Effect - The program is exposed to not being in compliance with the Reporting Requirements as established in agreement. Also, the Municipality is exposed to the Grantor questioning the use of funds. Recommendation - We recommend that the staff or department in charge locate and document all required reports that were filed according to the requirements of the grant agreement, including the reconciliation thereof with the official Municipality’s accounting subsidiaries. Also, it is absolutely necessary for the Municipality to design, document, establish and provide the necessary and required training, including guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds. Questioned Costs - None
Condition -The Municipality’s staff could not provide us with the officially prepared and certified reports that supported compliance with the filing or submission of reports and financial information, as required by federal award and regulatory agreements. Likewise, reconciliations were not provided between the information used to prepare the required and submitted reports with the formal information presented and accounted for in the official Municipality’s accounting system. Criteria - The state is required to make an accounting to FEMA of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the FEMA-State Agreement, all grants conditions were met, ant the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’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 permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of knowledge and training to the personnel assigned to the management and reports preparation, as required by this federal award. Additionally, the Municipality does not have an adequate monitoring and internal control regarding the activity, filing and custody of reports, as required by the federal awards and the pass-through entity, and in a way that documents and supports the compliance with reporting requirements. Effect - The program is exposed to not being in compliance with the Reporting Requirements as established in agreement. Also, the Municipality is exposed to the Grantor questioning the use of funds. Recommendation - We recommend that the staff or department in charge locate and document all required reports that were filed according to the requirements of the grant agreement, including the reconciliation thereof with the official Municipality’s accounting subsidiaries. Also, it is absolutely necessary for the Municipality to design, document, establish and provide the necessary and required training, including guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds. Questioned Costs - None
Finding 2023-004 – Period of Performance Federal Agency: Department of Health and Human Services Federal program title: Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: Illinois Department of Human Services Pass-Through Number: 45CBB04278; 45CBB03514; 45CBB00648 Award Period: 07/01/2022 – 06/30/2023 Criteria or specific requirement: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $7,253 Context: Four (4) of the sixteen (16) transactions selected for testing. Cause: The Organization did not have a control in place to ensure the proper cut-off of expense charged to federal awards. Effect: The Organization allocated unallowable costs to the federal grant. Repeat Finding: No Recommendation: Management should review and revise its process for allocating costs to federal grants to include additional layers of review related to the cut-off of grant expenditures. Particular attention should be focused on the first and last month of the grant budget period. Views of responsible officials: There is no disagreement with the audit finding.
2023-012 CACFP Subrecipient Reimbursements The BCFNA does not have sufficient controls and procedures to ensure CACFP reimbursements to subrecipients are allowable and supported with sufficient documentation. As a result, significant unallowable and unsupported reimbursements are made without being prevented or detected on a timely basis. The BCFNA administers the CACFP through contracts with child and adult care centers and sponsors of centers (subrecipients) that provide meals to eligible children and adults under their care. The facilities/sponsors determine eligibility of each participant for free or reduced price meals, and are reimbursed at fixed rates for the number and type of meals served. During the year ended June 30, 2023, the BCFNA paid over 750 facilities/sponsors approximately $75 million for meal services. Disbursements to facilities/sponsors represented approximately 98 percent of the program's expenditures. To receive reimbursement for meals provided to eligible participants, CACFP facilities/sponsors submit monthly claims through the CNPWeb (CNP) claim system. The CNP system has edit checks to prevent and detect certain claim errors, such as meal claims that exceed facility/sponsor total enrollment and/or license capacity, or claims for types of meals the facility/sponsor was not approved to serve. Claims that pass the edit checks are reviewed by a BCFNA Public Health Program Associate, while claims that do not pass the edit checks are returned to the facility/sponsor for revision. Facilities/sponsors are not required to provide supporting documentation with their claim. Facilities/sponsors are required to maintain and retain detailed records, including meal count, attendance, enrollment and eligibility determination records, receipts, menus, and other documentation to support meals claimed. BCFNA nutritionists perform periodic monitoring reviews of the facilities/sponsors and disallow costs associated with claim errors identified. These reviews have identified significant issues and claim errors, including some potentially fraudulent activity, and led to over 15 contract terminations in recent years. Since meal reimbursements are made without any supporting documentation, the BCFNA relies on system edit checks and subrecipient monitoring procedures to prevent and detect meal reimbursement claim errors. However, these edits and procedures alone are not sufficient to prevent and detect unallowable and unsupported meal reimbursement claims on a timely basis. The BCFNA has not implemented procedures to review supporting documentation, at least on a test basis, except for testing performed during routine monitoring reviews generally conducted once every 1 to 3 years for each facility/sponsor, and technical assistance reviews performed at the request of the facility/sponsor. Additionally, as noted in finding number 2023-013, weaknesses in the BCFNA monitoring procedures were identified. Our review of documentation supporting a randomly-selected sample of 60 BCFNA monitoring reviews conducted for 58 CACFP facilities/sponsors during the year ended June 30, 2023, noted BCFNA disallowances (overclaims/underclaims) in 41 of 58 (71 percent) reviews for which meal reimbursement claims were tested. Overclaims totaled $50,954 (36 reviews) and underclaims totaled $280 (5 reviews), with a net overclaim of $50,674, or at least 11 percent of claims tested by the BCFNA. Disallowances resulted from various errors including incorrect or unsupported eligibility determinations, meal counts, attendance records, or noncompliance associated with menus and food purchases. The BCFNA adjusted subsequent claims to recoup or reimburse for the identified overclaims/underclaims., Erroneous and unsupported reimbursements represent at least 11 percent of meal reimbursements tested. If similar errors were made on the remaining population of CACFP meal reimbursements totaling approximately $74.6 million, unallowable costs could be significant. Without sufficient controls to ensure the accuracy of facility/sponsor meal reimbursement claims, the BCFNA cannot demonstrate adequate internal controls to ensure CACFP costs are allowable and supported, and the risk of paying unsupported and unallowable claims will continue. Regulation 7 CFR Section 226.7(k) requires the BCFNA to establish procedures for institutions to properly submit claims for reimbursement. Such procedures must include edit checks, including but not limited to, ensuring 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 times operating days times approved meal types. Regulation 2 CFR Section 200.403 provides that costs charged to federal programs should be necessary and reasonable for the performance of the federal award and adequately documented. Furthermore, 2 CFR Section 200.303(a) requires the non-federal entity to "[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-federal entity is managing that 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." Finding classification This finding is classified as a material weakness in internal control and material noncompliance with the federal activities allowed, allowable costs, and subrecipient monitoring requirements. The noncompliance identified in the finding is material based on the results of our audit sample, which identified at least 11 percent of subrecipient meal reimbursements tested by the BCFNA were not in compliance with federal requirements. The 11 percent error rate exceeds our audit materiality threshold of 4 percent. While the errors identified in the finding were corrected, similar material noncompliance in the remainder of the payments not tested is likely. Our decisions regarding the classification of the internal control deficiencies were made in accordance with AU-C Section 935, Compliance Audits, and the AICPA Audit Guide: Government Auditing Standards and Single Audits (Audit Guide). The Audit Guide provides the following definitions regarding internal control deficiencies: "A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis." "A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis." "A reasonable possibility exists when the likelihood of the event is either reasonably possible or probable …" Reasonably possible is "[t]he chance of the future event or events occurring is more than remote but less than likely." Probable means "[t]he future event or events are likely to occur." The failure to design and implement adequate controls and procedures to ensure CACFP reimbursements to subrecipients are allowable and supported led to material noncompliance with the applicable requirements. The BCFNA's controls failed to prevent the material noncompliance identified. While the BCFNA's controls detected and corrected the payment errors identified, the detection and correction was not timely, occurring up to 3 years after the payments were made. Also, the detection and correction was limited to only 1 test month per subrecipient without any attempt to identify and correct noncompliance that occurred beyond the test month because, as noted at finding number 2023-013, the BCFNA's controls do not provide for expanded testing when significant errors are identified. Therefore, similar, material noncompliance in the remainder of the payments not tested is likely. Further, because the internal control deficiencies have not been corrected, similar, material noncompliance in future payments is likely. For these reasons, the deficiencies are considered a material weakness. Recommendation The DHSS through the BCFNA strengthen internal controls over meal reimbursements to CACFP facilities/sponsors to ensure costs are allowable and supported. Auditee's Response We disagree with the auditor's finding. Our Corrective Action Plan includes an explanation and specific reasons for our disagreement. Auditor's Comment The DHSS Corrective Action Plan (CAP) states the DHSS disagrees with the State Auditor's Office (SAO) finding; and believes BCFNA controls over meal reimbursements are strong, the BCFNA is in full compliance with all requirements, and no corrective action is needed. However, in making these statements, the DHSS has failed to recognize and acknowledge existing subrecipient reimbursement and monitoring procedures have allowed serious and material subrecipient noncompliance. Regulation 7 CFR Section 226.7(k) requires the BCFNA to establish procedures for subrecipients to properly submit claims for reimbursement. Given the level of material subrecipient noncompliance that has and continues to occur, BCFNA procedures are clearly not sufficient to prevent future noncompliance. The BCFNA has focused on individual components of its systems, but has not holistically evaluated whether the procedures, collectively and in their entirety, comply with the federal requirements intended to ensure subrecipient reimbursements are allowable and supported. The BCFNA continues to strictly follow existing procedures without making adequate adjustments to address and mitigate the serious subrecipient reimbursement problems. Recognizing problems and reacting to those problems are critical components of an effective internal control structure designed to ensure compliance with the federal requirements. The DHSS CAP argues the 11 percent error rate, based on the sample of monitoring reviews performed during the year ended June 30, 2023, is inflated because the reviews are proportionally more likely to include a higher number of claims with discrepancies. However, this error rate is just one indicator of the serious ongoing subrecipient problems. The DHSS CAP includes various misrepresentations of the contents of the finding and the recommendation. These statements, which attempt to negate or reduce the significance of the noncompliance noted in the finding, are listed below (in quotes): 1) "The SAO has not noted any specific noncompliance with federal requirements regarding subrecipient monitoring." This statement is incorrect. The finding states the BCFNA has not complied with 7 CFR Section 226.7(k) requirements (and related Uniform Guidance requirements) regarding procedures for ensuring claims are properly submitted. Furthermore, finding number 2023-013 states the BCFNA did not comply with overall federal subrecipient monitoring requirements as well as specific components of those requirements, including properly following up and ensuring subrecipients take timely and appropriate action on all deficiencies identified and disallowing and recovering improper payments. 2) "Reviewing supporting documentation with every individual reimbursement claim at the time of submission as suggested in the finding…" This statement is incorrect. The finding does not suggest or recommend that the BCFNA require or review documentation for every claim prior to payment. Instead, the finding recommends the BCFNA strengthen internal controls over meal reimbursements to ensure costs are allowable and supported. 3) "Out of the SAO's test sample of 60 monitoring reviews, only 9 of the overclaims were over the $600 threshold of acceptable risk set by the USDA." This statement is incorrect. Of the 36 sampled monitoring reviews with overclaims totaling $50,954, 13 reviews with overclaims totaling $46,724, were in excess of $600. As noted in the finding, if the remaining 23 overpayments of $600 or less, totaling $4,230 are excluded, the error rate is at least 9 percent. Subrecipient data clearly shows significant subreicipient noncompliance is occurring within the CACFP program. These problems cannot be denied and should not be ignored. Until the DHSS recognizes these problems, acknowledges there are weaknesses in its existing procedures, and takes action to strengthen its procedures, significant improper payments to subrecipients will likely continue.
U.S. Department of Health and Human Services Maternal, Infant, and Early Childhood Home Visiting Assistance Listing #93.870 Finding 2023-004 Material Weakness, Material Noncompliance – Allowable Costs/Activities Criteria – Per 2 CFR Part 200, Subpart E (2 CFR Section 200.403): (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition – Prepaid gift cards for grocery and gas were purchased in bulk and recorded as federal expenses. However, not all cards were distributed to eligible beneficiaries as of June 30, 2023, and therefore should not have been expensed as not all criteria for allowable costs had been met. Questioned Costs – Approximately $50,580 in expenses were reported that had not yet met all of the allowable cost criteria to be considered federal expenses. Context – The Organization distributed prepaid gift cards to eligible beneficiaries as needed throughout the year ended June 30, 2023. However, not all of the prepaid gift cards had been distributed by June 30, 2023. Effect – By reporting federal expenses prior to meeting all criteria for allowable costs, the Organization runs the risk that amounts may be determined as unallowed by the federal awarding agency and the Organization may have to return the federal funds. Cause – Current processes of the Organization record the purchase of gift cards as an expense, prior to all allowable cost requirements being met. Recommendation – We recommend the Organization improve policies and procedures to record the purchase of gift cards as a prepaid transaction and only expense these items when all allowable cost criteria are met. Management’s Response – Management will improve policies and procedures to record the purchase of gift cards as a prepaid transaction and expense the gift cards when all allowable cost criteria are met. Management will also get input from grant funders when necessary.
U.S. Department of Health and Human Services Maternal, Infant, and Early Childhood Home Visiting Assistance Listing #93.870 Finding 2023-004 Material Weakness, Material Noncompliance – Allowable Costs/Activities Criteria – Per 2 CFR Part 200, Subpart E (2 CFR Section 200.403): (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition – Prepaid gift cards for grocery and gas were purchased in bulk and recorded as federal expenses. However, not all cards were distributed to eligible beneficiaries as of June 30, 2023, and therefore should not have been expensed as not all criteria for allowable costs had been met. Questioned Costs – Approximately $50,580 in expenses were reported that had not yet met all of the allowable cost criteria to be considered federal expenses. Context – The Organization distributed prepaid gift cards to eligible beneficiaries as needed throughout the year ended June 30, 2023. However, not all of the prepaid gift cards had been distributed by June 30, 2023. Effect – By reporting federal expenses prior to meeting all criteria for allowable costs, the Organization runs the risk that amounts may be determined as unallowed by the federal awarding agency and the Organization may have to return the federal funds. Cause – Current processes of the Organization record the purchase of gift cards as an expense, prior to all allowable cost requirements being met. Recommendation – We recommend the Organization improve policies and procedures to record the purchase of gift cards as a prepaid transaction and only expense these items when all allowable cost criteria are met. Management’s Response – Management will improve policies and procedures to record the purchase of gift cards as a prepaid transaction and expense the gift cards when all allowable cost criteria are met. Management will also get input from grant funders when necessary.
2023-002 Incorrect Allocation of Program Expense and Inadequate Documentation Program Name/ Assistance Listing Number: 93. 959 Block Grants for Prevention and Treatment of Substance Abuse Federal Agency: Department of Health and Human Services Federal Award Identification: Unknown Type of Finding: Material Weakness Compliance Requirement: Allowable Costs/Cost Principles Criteria: According to 2 CFR §200.302, entities receiving federal funds must have effective internal controls over the use of funds to ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award. Furthermore, 2 CFR §200.403 states that costs must be adequately documented and be allocable to the respective federal award to be considered allowable. Condition: During the testing of 60 expense transactions, the auditor identified the following exceptions: - 5 transactions were allocated to the incorrect grant. - 3 transactions were assigned to the incorrect expense program. - 4 transactions lacked the required invoice and payment approval documentation as per the organization’s internal controls. Cause of Condition: The identified issues likely stem from a lack of adherence to established internal control procedures and inadequate oversight or training regarding the correct allocation of expenses. Additionally, there may be deficiencies in the document retention process, leading to incomplete records. Effect: The misallocation of expenses could result in non-compliance with the terms and conditions of federal grants, leading to potential questioned costs and the need for reimbursement of funds. The lack of supporting documentation further increases the risk of noncompliance and reduces the audit trail, which could impair the organization’s ability to justify its use of federal funds. Questioned Cost: $24,464 Recommendation: The organization should reinforce its internal controls over expense allocation and documentation retention by providing additional training to staff involved in the financial management of grants. Implementing periodic reviews and reconciliations of grant allocations and ensuring that all supporting documentation is complete and properly filed will help mitigate the risk of misallocations and incomplete records in the future. Description of the Nature and Extent of Issues Reported: We consider the following materiality for consideration of material noncompliance for the major program 93.959 at 5% of the total awards expended amounting to $51,253. View of Responsible Official: Management agrees with the finding and will implement corrective action.