Finding 2024-001: Proper Support for Payroll Cost Allocations Federal Program: Block Grants for Prevention and Treatment of Substance Abuse, 93.959 Federal Agency: U.S Department of Health and Human Services Pass-Through Entity: United Community Services, Inc. Criteria: According to 2 CFR 200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our audit, we noted that payroll costs for employees working on the Block Grants for Prevention and Treatment of Substance Abuse grants were not charged based on actual hours worked. Instead, payroll was allocated using budgeted estimates with several subsequent adjustments to those allocations to reflect what they believed to be actual time spent on grant- related activities. Cause: The Organization relied on predetermined salary allocations rather than allocating based on the time and effort reporting system that tracks actual hours worked on federal programs as some employees were not properly coding time worked by grant on their time sheets. Effect: Payroll costs charged to the grant may not accurately reflect the time employees spent on grant- related activities, leading to potential unallowable costs and noncompliance with federal regulations. Questioned Costs: Not determined. Recommendation: We recommend that the Organization utilize the time and effort reporting system that ensures payroll costs are charged to federal awards based on actual hours worked and to train employees to properly code their hours. If actual hours are not used, management should review and adjust salary allocations periodically to align with documented time records.Views of Responsible Officials: Additional and ongoing training on entering time will be done with employees. Additional and ongoing training on reviewing and approving time will be done with supervisors. An additional level of checking will be done each month by someone other than the supervisor. Additional reporting capabilities are being programmed into Employee & Family Resources, Inc.'s time keeping system to help with this.
Finding 2024-001: Proper Support for Payroll Cost Allocations Federal Program: Block Grants for Prevention and Treatment of Substance Abuse, 93.959 Federal Agency: U.S Department of Health and Human Services Pass-Through Entity: United Community Services, Inc. Criteria: According to 2 CFR 200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our audit, we noted that payroll costs for employees working on the Block Grants for Prevention and Treatment of Substance Abuse grants were not charged based on actual hours worked. Instead, payroll was allocated using budgeted estimates with several subsequent adjustments to those allocations to reflect what they believed to be actual time spent on grant- related activities. Cause: The Organization relied on predetermined salary allocations rather than allocating based on the time and effort reporting system that tracks actual hours worked on federal programs as some employees were not properly coding time worked by grant on their time sheets. Effect: Payroll costs charged to the grant may not accurately reflect the time employees spent on grant- related activities, leading to potential unallowable costs and noncompliance with federal regulations. Questioned Costs: Not determined. Recommendation: We recommend that the Organization utilize the time and effort reporting system that ensures payroll costs are charged to federal awards based on actual hours worked and to train employees to properly code their hours. If actual hours are not used, management should review and adjust salary allocations periodically to align with documented time records.Views of Responsible Officials: Additional and ongoing training on entering time will be done with employees. Additional and ongoing training on reviewing and approving time will be done with supervisors. An additional level of checking will be done each month by someone other than the supervisor. Additional reporting capabilities are being programmed into Employee & Family Resources, Inc.'s time keeping system to help with this.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
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 84.048 – Career and Technical Education – Basic Grants to States – Allowability Grant Number & Year: V048A220027, FFY 2023 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2024), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.430(i)(1) (January 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Enclosure A of the “Letter to Chief State School Officers on Granting Administrative Flexibility for Better Measures of Success” (September 7, 2012) provides guidelines for local educational agencies (LEAs), using a substitute system for time-and-effort reporting. Enclosure A states, in relevant part, the following: (2) Under the substitute system, in lieu of personnel activity reports, eligible employees may support a distribution of their salaries and wages through documentation of an established work schedule that meets the standards under section (3). An acceptable work schedule may be in a style and format already used by an LEA. (3) Employee schedules must: a. Indicate the specific activity or cost objective that the employee worked on for each segment of the employee’s schedule; b. Account for the total hours for which each employee is compensated during the period reflected on the employee’s schedule; and c. Be certified at least semiannually and signed by the employee and a supervisory official having firsthand knowledge of the work performed by the employee. Good internal control requires adequate supporting documentation to ensure that expenditures are correct and allowable. Condition: The Agency lacked documentation to support 3 of 11 aid payments tested. Repeat Finding: No Questioned Costs: $34,983 known Statistical Sample: No Context: We randomly selected 11 reimbursement payments to subrecipients for testing. We noted the following: • One reimbursement to a community college included salaries and benefits for two employees for $23,583. Documentation to support the salaries and benefits was inadequate. The Agency provided time and effort certifications, stating that the employees worked 50% on the Career and Technical Federal program and 50% on a different program. However, no other documentation – such as an employee work schedule – was provided to support that this distribution was correct. The $23,583 paid for salaries and benefits are considered questioned costs. • One reimbursement was to an Educational Service Unit (ESU). The ESU made payments to schools in order for the schools to reimburse its teachers for their costs for attending a conference and also paying the teachers a stipend for attending the conference. The payments to teachers were to include $120/night for hotels, $300 for registration fees, $265 for mileage, and $125/day as a stipend for each day the teachers attended the conference. However, documentation was not provided to support that the reimbursements/stipends went to all the teachers, or if the school should have kept the reimbursement if it paid for the hotels and registration fees. Additionally, documentation was lacking to support that all the teachers actually stayed at the hotel or that the school paid for the hotel. Lastly, documentation was not provided to support that the stipend amount was reasonable and approved by appropriate personnel. This resulted in questioned costs of $11,192. • One reimbursement to a school included payments to teachers for attending a conference. One hundred and sixty dollars was paid to 13 teachers based on the U.S. General Services Administration per diem rates for meals and incidental expenses. However, per the conference agenda, lunch was provided for one of the days, so the amount paid per teacher should have been reduced to $144, but it was not. This resulted in questioned costs of $208. Federal payment errors for the sample tested were $34,983. The total sample tested was $1,910,166, and aid payments for the fiscal year totaled $7,485,494. Based on the sample tested, the dollar error rate for the sample was 1.83% ($34,983/$1,910,166), which estimates the potential dollars at risk for fiscal year 2024 to be $136,985 (dollar error rate multiplied by population). Cause: Lack of procedures to ensure all costs were adequately documented. Effect: Without adequate supporting documentation, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to ensure that payments are supported by adequate documentation. Management Response: The Nebraska Department of Education’s Office of Career, Technical, and Adult Education provided emails which detailed the purpose for Sharri’s work within the CTE program. The college provided the time and effort certification for the time period in question for the employee but the documentation from the college did not provide the actual work performed information. The Nebraska Department of Education’s Office of Career, Technical, and Adult Education was able to provide most of this documentation related to the reimbursement for teachers attending the conference but was unable to collect the documentation from some of the schools within the ESU 4 Perkins consortium. ESU 4 was not able to provide a stipend policy, though they were able to provide meeting notes where the stipend policy was outlined ahead of time.
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 93.563 – 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 93.563 – 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 93.563 – 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 93.563 – 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 93.778 - 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 93.563 – 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 93.778 - 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 15.611 – Wildlife Restoration and Basic Hunter Education and Safety – Allowability & Subrecipient Monitoring Grant Number & Year: F22AF01344-00, July 1, 2022, through June 30, 2025 Federal Grantor Agency: U.S. Department of the Interior Criteria: For the Wildlife Restoration program, Title 50 CFR § 80.50(a)(6)(iii) (October 1, 2023) states, in part, “Grantees and subgrantees must follow the requirements at 2 CFR part 200 when acquiring equipment, goods, and services under an award[.]” 2 CFR § 200.332(d) (January 1, 2024) requires a pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.] 2 CFR § 200.403 (January 1, 2024) requires costs to be necessary, reasonable, and adequately documented. 2 CFR § 200.430(i) (January 1, 2024) provides the following, in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE’s definition of IBS); * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: * * * * (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 2 CFR § 200.431(b) (January 1, 2024) states, in relevant part: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under established written leave policies; (2) The costs are equitably allocated to all related activities, including Federal awards; and, (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. (i) When a non-Federal entity uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is taken and paid for. Payments for unused leave when an employee retires or terminates employment are allowable in the year of payment. (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 2 CFR § 200.431(c) (January 1, 2024) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker’s compensation insurance (except as indicated in §200.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. A good internal control plan requires procedures to ensure that salaries and wages, as well as other costs charged to subawards, are documented properly. Condition: Adequate documentation was not on file to support a payment to a subrecipient. Repeat Finding: No Questioned Costs: $1,697 known Statistical Sample: No Context: We randomly selected 16 non-payroll documents to test. Our sample population included operating expenditures, capital outlay expenditures, and subrecipient reimbursements. One of 16 documents tested lacked adequate documentation to support that the costs were in accordance with Federal cost principles. The Agency paid $17,268 to a subrecipient that submitted an invoice for lodging and travel costs, payroll, and indirect costs for one employee. The employee’s base rate of $35.82 per hour for 378.5 hours worked on the grant was calculated according to the following: a pay rate of $24.76 per hour; a charge of 18% for paid time off; 22.6% for employer taxes and benefits; and 26.2% for indirect costs. However, the subrecipient provided no documentation, such as payroll records or bank statements, to support the payroll costs, totaling $17,110. After the APA requested support, the Agency provided paystubs and detailed payroll records from the subrecipient’s accounting system; however, based on the support provided, the wages, benefits, taxes, and indirect costs allocable to the grant totaled $15,413. As a result, we questioned the variance of $1,697 between the support provided and the amount charged to the grant for the payroll costs. Federal payment errors noted for the sample tested were $1,697. The total Federal sample tested was $300,860, and the total sample population was $10,649,122. Based on the sample tested, the case error rate was 6.25% (1/16). The dollar error rate was 0.56% ($1,697/$300,860), which estimates the potential dollars at risk for fiscal year 2024 to be $59,635 (dollar error rate multiplied by the population). Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate subrecipient monitoring procedures and supporting documentation on file, there is an increased risk for not only misuse of Federal funds but also payments not complying with State and Federal requirements. Recommendation: We recommend the Agency improve subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: NGPC disagrees with the questioned costs identified by the APA. Our subrecipient policy includes the ability to ask for detailed records for any expense at any time. Accounting records, invoices, and paystubs were provided to substantiate the total invoice amount. The subrecipient has been audited and there were no issues with their financial systems. Explanations and calculations were provided to include the benefits and taxes paid out by the subrecipient, which matched the accounting records. Per their latest audit, these expenses are allocated on the basis of time and effort which complies with 2 CFR § 200.431(c). Performance reports were received and activity monitored by NGPC staff. NGPC works closely with the subrecipient which is considered a low-risk entity as demonstrated by the information provided for the audit. APA Response: Documentation provided to the auditors was inadequate to support the full amount charged to the grant. Documentation was not provided to support that the paid time off charged to the grant was reasonable, and no support was provided for Federal and State unemployment taxes, workers’ compensation costs, retirement plan fees, and other benefit costs.
Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2021-11-00, Performance End FFY 2024; NE-2023-030-00, Performance End October 30, 2025; NE-2024-006-00, Performance End December 31, 2026 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2024), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2024) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2024) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2024) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR § 200.405(a) (January 1, 2024), “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.” 2 CFR § 200.442(a) (January 1, 2024) states the following: Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions, are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with the prior written approval of the Federal agency. Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2023-065 Questioned Costs: $4,905 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: During the fiscal year, the Agency paid 64 subrecipients a total of $12,622,391. We selected five payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we provided the Agency with the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. See Schedule of Findings and Questioned Costs for chart/table. We noted the following: • Two subrecipients tested did not have adequate support for all personnel charges. One individual tested was reimbursed at the non-operating rate but should have been reimbursed at the operating rate. Another individual’s personnel costs were based on budgeted amounts. • Fuel costs for one subrecipient did not agree with invoices. • One subrecipient did not properly report revenues collected, resulting in an overcharge of the Federal reimbursement. • All five subrecipients tested had capital or non-operating costs that were not adequately supported. Costs allocated between programs were not adequately supported, travel costs did not appear reasonable, and fundraising costs of $100 were charged. Cause: Procedures were not adequate to ensure costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT acknowledges the audit findings related to subrecipient monitoring and cost allowability under the grant funding. We will continue to ensure compliance with regulations and are committed to improving our internal controls to prevent recurrence of similar findings.
Federal agency: U.S. Department of Education Federal program title: Adult Education - Basic Grants to States Assistance Listing Number: 84.002 Pass-Through Agency: Massachusetts Department of Elementary and Secondary Education Pass-Through Number(s): Code 340 Award Period: July 1, 2023 – June 30, 2024 Type of Finding: • Material Weakness in Internal Control over Compliance • Material Noncompliance (Modified Opinion) Compliance Requirements: Activities Allowed or Unallowed and Allowable Cost/Cost Principles Criteria or Specific Requirement: The Code of Federal Regulations (CFR) Title 2 Part 200.430 states that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Condition and Context: For all payroll charges selected for testing, the City could not provide records that accurately reflected the work performed. Questioned Costs: $29,613 Cause: Procedures to maintain records that accurately reflect the work performed for payroll charges to the grant need to be implemented and/or strengthened. Effect: Noncompliance with the federal program occurred and we could not determine the allowability of payroll charges to the grant. Repeat Finding: Yes (Finding 2023-002) Recommendation: We recommend procedures to maintain records that accurately reflect the work performed for payroll charges to the grant be implemented/strengthened. Views of Responsible Officials: Management agrees with the finding.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
U.S. Department of Education – Passed-through the NYS Education Department Title I Grants to Local Educational Agencies (LEAs); Assistance Listing Number (ALN) 84.010; Project #’s 0021-23-2955, 0011-23-6011, 0011-23-7200, 0011-24-2160, 0021-24-2955, Grant Period – Fiscal Year Ended June 30, 2024 U.S. Department of Education – Passed-through the NYS Education Department – Education Stabilization Fund COVID-19 – Elementary and Secondary School Emergency Relief (ESSER) Fund; ALN 84.425D; Project #5891-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP- ESSER) Fund; ALN 84.425U; Project 5880-21-2955, 5884-21-2955, 5883-21-2955, 5882- 21-2955; Grant Period – Fiscal Year Ended June 30, 2024 COVID-19 – American Rescue Plan – Elementary and Secondary School Emergency Relief - Homeless Children and Youth; ALN 84.425W; Project#5218-21-2955; Grant Period – Fiscal Year Ended June 30, 2024 Significant Deficiency Compliance Requirement: Allowable Activities and Cost Principles Criteria: Per Uniform Guidance (2 CFR §200.430), payroll costs charged to federal grants must be supported by appropriate documentation reflecting actual time and effort spent on grant-related activities. Per District policy, employees are required to submit Personnel Activity Reports (PARs) to certify time worked on a federal grant. PARs are then required to be reviewed and approved by a direct supervisor. Condition: We identified seventeen (17) instances of missing or incomplete PAR forms for Title I. Six (6) out of (17) employees did not complete a PAR form. Eleven (11) out of (17) did not document supervisor review and approval. For the education stabilization fund, the District was unable to provide support for time and effort worked on the grant for eleven (11) employees. Cause: Due to significant changes in personnel and work environments of key employees, the District was unable to maintain adequate oversight over the payroll function. Effect: The District is not in compliance with federal grant requirements and District policy. Questioned Costs: None. Recommendation: We recommend the District enhance internal control measures to verify the accuracy and completeness of PARs in a timely manner. We also recommend the District conduct independent reviews of the payroll process and time and effort reporting to verify established controls are functioning as intended. District’s Response: The District’s response is included in their corrective plan.
Federal Agency: U.S. Department of Defense Program/Cluster: Community Economic Adjustment Assistance for Responding to Threats to the Resilience of a Military Installation Federal Assistance Listing Number: 12.003 Award No.: MIR1973-22-01 Award Year: 2023 Compliance Requirement: Matching, Level of Effort and Earmarking Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(g)(4) Salaries and wages of employees used in meeting cost sharing requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from Federal awards. 2 CFR 200.306(f) requires that if services furnished by a third-party organization are claimed as a cost-sharing match, these services must be valued at the employee’s regular rate of pay, plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable. Condition: We noted personnel services furnished by third-party organizations totaled $31,025 for the life of the grant, including $10,854 in fiscal year 2024. For the services furnished by third-party organizations as a local match of costs, the City valued the personnel time based on budgeted rates. The City could not provide documentation supporting the actual cost incurred by the third-party organization to support the in-kind services claimed. Cause: The City’s policies and procedures for in-kind services furnished by third-party organizations toward the grant did not include obtaining documentation to support the actual costs incurred and value of services claimed. Effect: The City did not comply with required local match of expenses for the grant. Questioned Costs: We identified questioned costs totaling $2,435 for unsubstantiated costs furnished by third-party organizations claimed as local cost share expenditures. Context/Sampling: A nonstatistical sample of 13 out of 54 local cost share expenditures were tested. This represents $9,114 of local cost share expenditures out of a total of $46,809 incurred for fiscal year 2024. Upon further investigation, the questioned costs were isolated to contributed services furnished by third-party organizations which totaled $10,854 in the fiscal year 2024. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City establish policies and procedures and documentation standards to comply with the Uniform Guidance standards for documentation of personnel expenses used to meet the local share of expenses. Views of Responsible Officials: Management concurs with the finding. See separate corrective action plan.
Criteria: Per federal regulation 2 CFR section 200.430(i)(1)(vii), the School District must maintain time and effort records for employees who work, all or in part, under federal grants. Condition: The School District did not maintain complete time and effort documentation. Cause: The semi-annual certifications provided by an employee were not signed by the employee. Also, time and effort documentation on stipends paid by the grant to employees for summer activity did not include information on the grant funding the activity. Two forms authorizing the stipends did not indicate the dates the work was performed; and of the 32 timesheets prepared by the recipients of the stipends, 29 did not cite the grant that was funding the activity. Effect: The School District was not in compliance with the allowable costs and cost principles requirement. Recommendation: We recommend that all required timesheets and other time and effort documentation include the required grant information; clearly identify the time worked on federal grants; include certifying statements that the information is true; and signatures by both employees and supervisor. Management’s Response: Management agrees with this finding. The Business Administrator will review all the prepared contracts to ensure all grant information is provided.
Criteria or Specific Requirement Federal regulation 2 CFR §200.430 states that “charges to Federal awards for salaries and wages must comply with the established accounting policies and practices of the non-Federal entity and budget estimates determined before the services are performed alone do not qualify as support for charges to Federal awards.” Entity policy states that “All employees who are paid in full or in part with federal funds, including employees whose salary is paid with state or local funds but is used to meet a required match or in-kind contribution to a federal program, shall document the amount of time they spend on grant activities (AR 3230)”. Condition In our review of employees charged to the WIOA program we noted that one employee who was split funded between WIOA and Vocational Training had a periodic time certification with fixed percentages, but did not work a fixed schedule throughout the year. Cause The Entity’s internal control process over deposits was not properly designed. Effect The Entity is out of compliance with 2 CFR §200.430. It is reasonably possible that additional employees are mischarged in the payroll system. Context During the 2023-24 fiscal year, the Entity charged 23 employees to the WIOA program in whole or in part for their salaries or extra duty performed. We reviewed time accounting documentation for 6 of the 23 employees charged to the program. We identified findings in 1 out of 6 that were reviewed. Repeat Finding No Recommendation Continue to provide training to all employees funded from federal programs and their supervisors to the requirements for federal time accounting under 2 CFR §200.430. Identify an individual responsible to monitor documentation to ensure it meets requirements. Implement a reconciliation between federal time accounting documentation and payroll records to ensure that appropriate adjustments are made to ensure payroll is charged to the correct programs. Views of Responsible Officials See Corrective Action Plan
Finding 2024-001 – Internal Controls over Payroll Tracking & Recording Assistance Listing #: ALL Federal Awards: All Criteria: In accordance with the Uniform Guidance’s compensation requirements (2 CFR 200.430), payroll systems must be based on records that accurately reflect the work performed and supported by a system of internal controls that provides reasonable assurances that charges are accurate; allowable and reasonable; and properly allocated amongst programs. Condition: During our testing of 40 payroll transactions, we noted six instances where the time charged on the employee’s timesheet by program did not agree to the programs actually charged in the general ledger, and ultimately billed to the applicable grant award. Thes errors identified occurred earlier in the fiscal year and prior to the completion of the FY 2023 audit when management became aware of the issue and implemented additional controls. Cause: The Organization summarizes employee timesheet data amongst programs on a reclass spreadsheet, which serves as the basis for entry into the general ledger. It appears there were errors when entering time from the timesheet into the reclass spreadsheet, which were not detected as a secondary review was not performed. After the issue was brought to the attention of management during the FY 2023 audit which was conducted in February 2024, no similar errors were detected in our sample. Effect: The effect of the errors noted above was immaterial; however, an inherent risk exists that errors could be material without a sufficient review process. Questioned Costs: N/A Repeat Finding: Yes Recommendation: As noted above, we recommend the Organization continue monitoring the recording of payroll costs to ensure that payroll costs are captured and recorded correctly in the financial management system. Response: We concur with the Finding. Additional controls were implemented late in fiscal year 2024 to ensure accurate recording of time charged to programs as reflected on the employee’s timesheet, which included training and periodic reviews of payroll transactions. As noted above, the errors cited were prior to those controls implemented.
Finding 2024-001 – Internal Controls over Payroll Tracking & Recording Assistance Listing #: ALL Federal Awards: All Criteria: In accordance with the Uniform Guidance’s compensation requirements (2 CFR 200.430), payroll systems must be based on records that accurately reflect the work performed and supported by a system of internal controls that provides reasonable assurances that charges are accurate; allowable and reasonable; and properly allocated amongst programs. Condition: During our testing of 40 payroll transactions, we noted six instances where the time charged on the employee’s timesheet by program did not agree to the programs actually charged in the general ledger, and ultimately billed to the applicable grant award. Thes errors identified occurred earlier in the fiscal year and prior to the completion of the FY 2023 audit when management became aware of the issue and implemented additional controls. Cause: The Organization summarizes employee timesheet data amongst programs on a reclass spreadsheet, which serves as the basis for entry into the general ledger. It appears there were errors when entering time from the timesheet into the reclass spreadsheet, which were not detected as a secondary review was not performed. After the issue was brought to the attention of management during the FY 2023 audit which was conducted in February 2024, no similar errors were detected in our sample. Effect: The effect of the errors noted above was immaterial; however, an inherent risk exists that errors could be material without a sufficient review process. Questioned Costs: N/A Repeat Finding: Yes Recommendation: As noted above, we recommend the Organization continue monitoring the recording of payroll costs to ensure that payroll costs are captured and recorded correctly in the financial management system. Response: We concur with the Finding. Additional controls were implemented late in fiscal year 2024 to ensure accurate recording of time charged to programs as reflected on the employee’s timesheet, which included training and periodic reviews of payroll transactions. As noted above, the errors cited were prior to those controls implemented.