2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
2024-038 Noncompliance with Payroll and Travel Expense Policies and Procedures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agencies: Various Pass-Through Entities: Various AL Numbers and Titles: Various – Research and Development Cluster Federal Award Numbers: Various Questioned Costs: None Identified Description: The University did not comply with payroll and travel expense policies and procedures. Background Information: During the year ended June 30, 2024, the Georgia Institute of Technology’s (“GIT” or the “Institute”) Department of Internal Audit completed audits of compliance with payroll and travel expense policies and procedures of two Schools within the Institute and identified noncompliance with those policies and procedures. Criteria: • Uniform Guidance 2 CFR § 200.302 Financial management • Uniform Guidance 2 CFR § 200.308 – Revision of budget and program plans • Uniform Guidance 2 CFR § 200.403 – Factors affecting allowability of costs • Uniform Guidance 2 CFR § 200.404 – Reasonable costs • Uniform Guidance 2 CFR § 200.405 – Allocable costs • Uniform Guidance 2 CFR § 200.430 – Compensation – personal services • Uniform Guidance 2 CFR § 200.475 – Travel costs • Uniform Guidance 2 CFR § 200.432 – Conferences • Title 41 CFR § 301-11.12 • Title 41 CFR § 301-11.200 Subpart C – Reduced per Diem Condition: • Noncompliance with travel policies • Noncompliance with payroll expense policies and procedures Cause: • Lack of sufficient controls for proper review and approval of travel authorizations and expensed transactions associated with sponsored award expenses • Lack of sufficient controls to ensure time and effort is properly charged to sponsored awards • Lack of consistency enforcing payroll expense policies for sponsored award management Effect: Payroll and travel expenditures may not be in compliance with federal or grant award provisions. Recommendation: • Complete and approve spend authorizations before travel to validate the necessity and reasonableness of expenses. • Include detailed justifications in spend authorizations for the travel purpose and award benefit. • Require sufficient justification for payroll expenses charged to sponsored awards, particularly for significant variances in effort. • Update internal control policies to enhance oversight and verification of time and effort reporting. This should include clear guidelines on the documentation required to support the work performed and the consequences of non-compliance. Views of Responsible Officials: Management agrees with the finding. See management’s corrective action plan.
Criteria or Specific Requirement: In accordance with 2 CFR 200.403 and 200.405, costs charged to federal awards must be necessary, reasonable, allocable to the program, and adequately documented. Only allowable costs as defined by the terms and conditions of the award and the Uniform Guidance may be charged to the grant. Condition: During our testing of expenditures submitted by Solvista Health for reimbursement, we identified instances where costs were charged to the grant that were not allowable under the Uniform Guidance or the terms of the grant agreement. Specifically, unallowable employee meals were included in travel reimbursement costs. Context: Employees’ meal expenditures were submitted as allowable costs and as travel costs; however employee meals are not an allowable expenditure per the grant agreement. Questioned Costs: $842 consisting of unallowable meal expenditures. Cause: Solvista Health did not have sufficient internal controls implemented to identify unallowed expenditures, which were submitted for reimbursement. Effect: Failure to submit unallowable expenditures for reimbursement may result in noncompliance with the federal awarding agency and may result in the repayment of any unallowable expenditures to the grantor. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend that Solvista Health implement internal controls to ensure review and approval of grant-related expenditures. Additionally, we recommend regular training of staff on allowable cost principles under Uniform Guidance.
Criteria or Specific Requirement: In accordance with 2 CFR 200.403 and 200.405, costs charged to federal awards must be necessary, reasonable, allocable to the program, and adequately documented. Only allowable costs as defined by the terms and conditions of the award and the Uniform Guidance may be charged to the grant. Condition: During our testing of expenditures submitted by Solvista Health for reimbursement, we identified instances where costs were charged to the grant that were not allowable under the Uniform Guidance or the terms of the grant agreement. Specifically, unallowable employee meals were included in travel reimbursement costs. Context: Employees’ meal expenditures were submitted as allowable costs and as travel costs; however employee meals are not an allowable expenditure per the grant agreement. Questioned Costs: $842 consisting of unallowable meal expenditures. Cause: Solvista Health did not have sufficient internal controls implemented to identify unallowed expenditures, which were submitted for reimbursement. Effect: Failure to submit unallowable expenditures for reimbursement may result in noncompliance with the federal awarding agency and may result in the repayment of any unallowable expenditures to the grantor. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend that Solvista Health implement internal controls to ensure review and approval of grant-related expenditures. Additionally, we recommend regular training of staff on allowable cost principles under Uniform Guidance.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2024-004 Payroll Allocation Programs: 16.820 Post Conviction DNA Testing, 21.027 Coronavirus State and Local Fiscal Recovery Funds, 84.047 TRIO Cluster – TRIO-Upward Bound Criteria: Per 2 CFR section 200.405, a cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with relative benefits received, which can be met if the cost is incurred specifically for the Federal award. Condition: A payroll allocation change for an employee working on multiple grants was submitted in April 2024, but allocation was not updated in the payroll system timely. Cause: Human error and oversight resulted in delays in updating the change in allocation between grants. Effect: The 21.027 Coronavirus State and Local Fiscal Recovery Funds grant was overcharged by $4,673 for related payroll costs. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: While payroll allocation changes were properly approved in April 2024 and total pay to the employee was correct, human error resulted in delays in updating the change in allocation between grants. When the error was identified, updates were made to the allocation in September 2024. Repeat Finding: No. Recommendation: Grant management personnel should enhance review procedures for payroll-related expenditures after grant allocation changes are made to ensure that changes submitted are properly reflected in the accounting records in the appropriate period. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
Finding - Activities Allowed or Unallowed & Allowable Costs/Cost Principles: Payroll, Assistance Listing Number 93.243; June 30, 2024 award year; U.S. Department of Health and Human Services Criteria or Specific Requirement In accordance with 2 CFR 200.405, A cost is allocable to a Federal award if the cost is assignable to that Federal award with the relative benefits received. These costs must be incurred specifically for the Federal award. Condition Found Of the Seventeen payroll charges selected for testing, the allocation of payroll charged to the Federal grant did not align with the percentage of time incurred specifically for the Federal grant in four instances. Questioned Costs None. Cause The Organization's payroll software did not allocate payroll charges in accordance with the percentage of hours spent working on the Federal grant. Effect Management charged costs to the grant in excess of those costs that were incurred specifically for the grant. Identification as a Repeat Finding This is not a repeat finding. Recommendation Management should understand the cause of the misallocation and correct this within their payroll software. Management should additionally ensure adequate review of payroll costs is in place to correct misallocations. Views of Responsible Officials and Planned Corrective Action See Corrective Action Plan.
2024-002 No Indirect Cost Allocation Methodology Program Name/Assistance Listing Number: 93.788 Opioid STR Federal Agency: Department of Health and Human Services Federal Award Identification: Unknown Type of Finding: Significant Deficiency Compliance Requirement: Allowable Cost/Cost Principles Criteria: According to 2 CFR Part 200 subpart E, Appendix IV, NPOs that receive Federal Awards are required to comply with the cost principles outlined in the Uniform Guidance when charging indirect costs to those awards. The criteria for NPO documentation of indirect cost allocation methodology include identifying the methods used to allocate indirect costs, documenting the basis for determining the allocation of each indirect cost, describing changes made to the methodology, accounting for differences between estimated and actual amounts, supporting the indirect cost rate(s) used, and demonstrating compliance with any specific limitations on indirect cost reimbursement imposed by the Federal Award. Condition: The Organization does not have a documented cost allocation methodology to ensure costs are properly allocated to the projects or activities that benefit from them. Cause of Condition: The organization has not established formal policies or procedures for documenting and applying cost allocation methodologies across programs. There is a lack of clear guidance on how to determine the proportional benefit of costs shared between multiple programs. Potential Effect of Condition: If an organization's indirect cost allocation methodology is not properly documented, it may be difficult for the auditors to verify that the indirect costs allocated to a particular federal award are reasonable, necessary, and allocable. This may result in disallowed costs or findings in the audit report, which could impact the organization's ability to receive future federal awards. Questioned Cost: Not quantifiable. Recommendation: We recommend that the organization should develop and implement a documented cost allocation methodology in accordance with CFR 200.405(d). This methodology should clearly define how costs are allocated when they benefit multiple projects and ensure that the allocation is based on proportional benefit, or any reasonable documented basis if proportions cannot be determined. Regular training should be provided to relevant employees who are responsible for indirect cost allocation to ensure adherence to the new methodology. Additionally, the organization should review its allocation process periodically to ensure compliance with regulatory requirements and internal controls. Description of the Nature and Extent of Issues Reported: We consider the following materiality for considerations of material noncompliance for the major program 93.788 at 5% of the total awards expended amounting to $106,845. Management Response: Management concurred with the finding. The Organization will use the Full-Time Equivalent (FTE) as an allocation method for such costs.
Federal Program Information: Funding Agency: U.S. Department of Agriculture Title: National School Lunch Program FAL Number: 10.555 & 10.553 Passthrough: N/A Award Year: 2024 Criteria: Title 2 Subtitle A Chapter II Part 200 Section 200.405 Allocable Costs (a) Allocable costs in general. A cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received. This standard is met if the cost satisfies any of the following criteria: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or (3) Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with these cost principles. (b) Allocation of indirect costs. All activities which benefit from the recipient's or subrecipient's indirect cost, including unallowable activities and donated services by the recipient or subrecipient or third parties, will receive an appropriate allocation of indirect costs. (c) Limitation on charging certain allocable costs to other Federal awards. A cost allocable to a particular Federal award may not be charged to other Federal awards (for example, to overcome fund deficiencies or to avoid restrictions imposed by Federal statutes, regulations, or the terms and conditions of the Federal awards). However, this prohibition would not preclude the recipient or subrecipient from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. (d) Direct cost allocation principles. If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit However, when those proportions cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c), the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Where the purchase of equipment or other capital asset is specifically authorized under a Federal award, the costs are assignable to the Federal award regardless of the use that may be made of the equipment or other capital asset involved, when no longer needed for the purpose for which it was originally required. See also §§ 200.310 through 200.316 and 200.439. Condition: During our review of national school lunch payroll, we identified the following issues: The District used school lunch funds to pay the payroll of an employee who was not working in the program. The employee worked in transportation and accounts payable. Questioned Costs: $59,074.56. This is the amount of school lunch program funds which were paid to the employee. We did not identify any other employees who were not legitimate employees of the school lunch program. Cause: The District did not ensure the funds expended were related to the national school lunch program. Effect: The District is not in compliance with Federal regulations related to internal control procedures and compliance requirements in relation to the grant and could put funding in jeopardy or require the District to reimburse the program. Auditor’s Recommendation: We recommend that all expenditures from the Food Service funds be related to food service. Ensure that only employees in food service are paid out of the national school lunch program funds. Responsible official’s view: Specific corrective action plan for the finding: This was the result of an error in changing a employee’s position from one department to another. Moving forward, the Human Resources Department will notify Payroll of any changes in position and will require TWO SIGNATURES prior to making any changes in pay coding. Timeline for completion of corrective action plan: Immediately. This process has already been put in place. Employee positions(s) responsible for meeting the timeline: Finance Director and Human Resources Director
Department of Health Finding 2024 ¬– 006: ALN 10.557 – WIC Special Supplemental Nutrition Program for Women, Infants, and Children (including COVID-19) A Significant Deficiency and Noncompliance Exist at the Department of Health Related to Activities Allowed or Unallowed, Allowable Costs/Costs Principles Federal Grant Number(s) and Year(s): 231PA705W1003 (10/01/2022-9/30/2023), 241PA705W1003 (10/01/2023-9/30/2024) Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: The Pennsylvania Department of Health (DOH) administers and monitors the WIC Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) which provides assistance to low-income families for supplemental foods, education, and social services. WIC funds are received via federal grants from the United States Department of Agriculture (USDA) to meet these needs. The Pennsylvania DOH is responsible for ensuring that granted funds are used for allowable costs and grant provisions are followed. WIC administrative grant Y23172 closed on September 30, 2023. The audit procedures disclosed that the closed grant had federal revenues that exceeded federal expenditures by approximately $95 thousand. DOH indicated that a credit was identified and posted to the grant after the FNS-798 grant close out report was submitted in February 2024. The credit was largely due to overcharges of costs for a Software License Agreement that was not allowable to the grant. The adjustment to record the credit to the grant posted in June 2024. Although DOH had identified and recorded the adjustment, DOH did not update the FNS-798 grant close out report which was necessary to return the corresponding federal funds to the USDA. DOH indicated that it is in the process of generating an updated FNS-798 report to enable the funds to be returned. Criteria: 2 CFR Section 200.303, Internal controls, states: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). Management Directive 325.12, Amended – Standards for Enterprise Risk Management in Commonwealth Agencies, adopted the internal control framework outlined in the United States Government Accountability Office’s Standards for Internal Control in the Federal Government (Green Book). The Green Book states in part: Management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Management should remediate identified internal control deficiencies on a timely basis. 2 CFR Section 200.405, Allowable costs, states: a) Allocable costs in general. A cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received. This standard is met if the cost satisfies any of the following criteria: Finding 2024 ¬– 006: (continued) (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or (3) Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with these cost principles. 2 CFR Section 200.406, Applicable credits, states: (a) Applicable credits refer to transactions that offset or reduce direct or indirect costs allocable to a Federal award. Examples of such transactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the recipient or subrecipient relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Cause: DOH was not aware of the overcharges at the time of grant closeout. Management subsequently became aware of the costs and credited the federal grant expenditures but did not recognize the FNS-798 report needed adjusted to facilitate the return of the federal funds. Effect: DOH had unallowable costs expended within grant Y23172 that were not identified until after the grant was closed. The unallowable costs were later credited to the grant causing cumulative revenues to exceed cumulative expenditures for the grant. The federal funds were not properly returned to the USDA. Recommendation: We recommend that DOH implement formal policies and procedures to prevent and detect any unallowable costs to ensure timely and accurate grant close out procedures. If adjustments are necessary after a grant is closed, procedures should include amending the FNS-798 report at the time of posting the adjustments. Furthermore, DOH should submit an updated FNS-798 report and return the $95 thousand of federal funds to USDA. Agency Response: DOH agrees with this finding. Questioned Costs: None
Department of Health Finding 2024 ¬– 006: ALN 10.557 – WIC Special Supplemental Nutrition Program for Women, Infants, and Children (including COVID-19) A Significant Deficiency and Noncompliance Exist at the Department of Health Related to Activities Allowed or Unallowed, Allowable Costs/Costs Principles Federal Grant Number(s) and Year(s): 231PA705W1003 (10/01/2022-9/30/2023), 241PA705W1003 (10/01/2023-9/30/2024) Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: The Pennsylvania Department of Health (DOH) administers and monitors the WIC Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) which provides assistance to low-income families for supplemental foods, education, and social services. WIC funds are received via federal grants from the United States Department of Agriculture (USDA) to meet these needs. The Pennsylvania DOH is responsible for ensuring that granted funds are used for allowable costs and grant provisions are followed. WIC administrative grant Y23172 closed on September 30, 2023. The audit procedures disclosed that the closed grant had federal revenues that exceeded federal expenditures by approximately $95 thousand. DOH indicated that a credit was identified and posted to the grant after the FNS-798 grant close out report was submitted in February 2024. The credit was largely due to overcharges of costs for a Software License Agreement that was not allowable to the grant. The adjustment to record the credit to the grant posted in June 2024. Although DOH had identified and recorded the adjustment, DOH did not update the FNS-798 grant close out report which was necessary to return the corresponding federal funds to the USDA. DOH indicated that it is in the process of generating an updated FNS-798 report to enable the funds to be returned. Criteria: 2 CFR Section 200.303, Internal controls, states: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). Management Directive 325.12, Amended – Standards for Enterprise Risk Management in Commonwealth Agencies, adopted the internal control framework outlined in the United States Government Accountability Office’s Standards for Internal Control in the Federal Government (Green Book). The Green Book states in part: Management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Management should remediate identified internal control deficiencies on a timely basis. 2 CFR Section 200.405, Allowable costs, states: a) Allocable costs in general. A cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received. This standard is met if the cost satisfies any of the following criteria: Finding 2024 ¬– 006: (continued) (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or (3) Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with these cost principles. 2 CFR Section 200.406, Applicable credits, states: (a) Applicable credits refer to transactions that offset or reduce direct or indirect costs allocable to a Federal award. Examples of such transactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the recipient or subrecipient relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Cause: DOH was not aware of the overcharges at the time of grant closeout. Management subsequently became aware of the costs and credited the federal grant expenditures but did not recognize the FNS-798 report needed adjusted to facilitate the return of the federal funds. Effect: DOH had unallowable costs expended within grant Y23172 that were not identified until after the grant was closed. The unallowable costs were later credited to the grant causing cumulative revenues to exceed cumulative expenditures for the grant. The federal funds were not properly returned to the USDA. Recommendation: We recommend that DOH implement formal policies and procedures to prevent and detect any unallowable costs to ensure timely and accurate grant close out procedures. If adjustments are necessary after a grant is closed, procedures should include amending the FNS-798 report at the time of posting the adjustments. Furthermore, DOH should submit an updated FNS-798 report and return the $95 thousand of federal funds to USDA. Agency Response: DOH agrees with this finding. Questioned Costs: None
CONDITION The State Treasurer's Office did not make subrecipients aware of all required grant award information for the Mineral Leasing Act. CRITERIA 2 CFR 200.332 requires pass-through entities to communicate specific required information to subrecipients. Required information includes: - Subrecipients name (Must match the name associated with its unique entity identifier) - Subrecipients unique entity identifier - Federal award identification number (FAIN) - Federal award date - Subaward period of performance start and end date - Amount of Federal funds obligated in the subaward - Total amount of Federal funds obligated to the subrecipient by the pass-through entity, including the current financial obligation - Total amount of the Federal award committed to the subrecipient by the pass-through entity - Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA) - Name of the Federal agency, pass-through entity, and contact information for awarding official of the pass-through entity - Assistance listings title and number; the pass-through entity must identify the dollar amount made available under each federal award and the Assistance listings number at the time of disbursement - Identification of whether the Federal award is for research and development - Indirect cost rate for the Federal award (including if the de minimis rate is used) - All requirements of the subaward, including requirements imposed by federal statutes, regulations, and the terms and condition of the Federal award 2 CFR 200.303 requires non-Federal entities, in part, to 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. CAUSE Not all grant agreement requirements were included in the grant award template. EFFECT Subrecipients may not have been aware of all necessary grant information and requirements. CONTEXT There were 40 awards during the audit period of 7/1/2022 - 6/30/2024. There were 8 awards tested with 8 errors noted. The following criteria were missing: - (ii) Subrecipient's unique entity identifier; - (iii) Federal Award Identification Number (FAIN); - (xiii) Identification of whether the award is R&D; and - (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. - (4) (i) An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: (A) The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; (B) The de minimus indirect cost rate. (ii) The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). - (6) Appropriate terms and conditions concerning closeout of the subaward. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend the State Treasurer's Office update its grant award templates to ensure that subrecipients are made award of all required grant award information. STATE TREASURER’S OFFICE RESPONSE The Office of the State Treasurer does agree with finding that our grant award template did not make subrecipients aware of all required grant award information for the Mineral Leasing Act as required. See “Management’s Response and Corrective Action” section of this report.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.778 - Medical Assistance Program; AL 93.959 - Block Grants for Prevention and Treatment of Substance Abuse; AL 93.767 - Children’s Health Insurance Program; AL 93.575 – Child Care and Development Block Grant; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2405NE5ADM, FFY 2024; 2305NE5ADM, FFY 2023; 23B1NESAPT, FFY 2023; 20242S251443, FFY 2024; 2301NECCDD; FFY 2023; 52305NE3002; FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) require payroll expenses charged to Federal awards to be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State accounting system and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. A similar finding was noted in the prior audit. We also noted no attempt was made to recover apparently fraudulent payroll expenses. Repeat Finding: 2023-031 Questioned Costs: $11,866 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 employee paychecks paid with Federal funds. Five of the 25 employees tested had payroll charged to the Substance Abuse and Prevention Block Grant (SAPTBG). We tested the May 1, 2024, paycheck for an Administrator. Payroll expenses were allocated 100% to the SAPTBG. However, the Agency could not provide documentation to show that 100% of the Administrator’s time was working on projects related to the SAPTBG. Based on some of the job duties of the employee, it appeared some time could have been coded to the Community Mental Health Services grant. All payroll for the period was questioned. Federal SAPTBG payroll charges tested totaled $6,908, and we noted $2,963 in sampled questioned costs. Federal payroll charges for SAPTBG totaled $473,739. We tested the January 24, 2024, paycheck for an IT Business Systems Analyst and noted the initial payroll expenses were split among several Economic and Assistance programs based on a time study that was effective during fiscal year 2022. Per the Fiscal Project Analyst, an updated study had not been done and should be done annually. The payroll expenses charged to the cost center were then allocated based on a time and effort study that had not been updated since at least September 2020. Payroll expenses charged to the Federal programs were questioned, and potential dollars at risk totaled over $5,000,000. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we reviewed the disciplinary actions against employees during the fiscal year. One employee tested was terminated on September 26, 2023, for falsifying the number of overtime hours worked. While working remotely on Saturday and Sundays, the employee would work only 30-60 minutes; however, he would then claim 10 hours of overtime for both of those days. The Agency reviewed the employee’s overtime hours reported to the supervisor, the KRONOS timecards, and time stamps of the work completed outside the employee’s scheduled shifts for the timeframe of May 7, 2023, through August 11, 2023. The employee reported and was paid for 469.5 overtime hours; however, the Agency determined the employee worked only 34.5 hours of overtime, a difference of 435 hours. The employee was paid $17,052 for overtime hours that were never worked in just a three-month timeframe. During fiscal year 2024, the Medicaid grant was overcharged $7,780 in apparently fraudulent payroll expenses for this employee. The employee was terminated, but no further action was taken against him. Moreover, no attempt was made to recover the amounts paid to the employee for the falsification of hours worked. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State accounting system, and those costs are properly allocated and charged. Management Response: Agency agrees.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.