Findings Citing § 200.516

Criteria – The OMB Compliance Supplement identifies Matching, Level of Effort, Earmarking as a type of compliance requirement subject to audit for applicable major programs and identifies level of effort as a compliance category within that requirement. Maintenance of effort is specifically described as the requirement that specified service or expenditure levels be maintained. As part of maintaining compliance with this requirement, the District should maintain documentation sufficient to support the MOE calculation used in its grant funding request and to demonstrate that required expenditure levels we met. Under 2 CFR § 200.516, deficiencies in internal control over compliance for major programs are reportable when they rise to the level of a material weakness or significant deficiency. Condition – Scituate School District was required to prepare a MOE calculation to support its special education grant funding request, however it did not retain sufficient supporting documentation for the calculation. Specifically, detailed budget and actual expenditure reports, reconciliations to the general ledger or other underlying accounting records, and/or retained workpapers supporting the underlying inputs were not maintained in a manner that permitted full verification of the calculation. As a result, we were unable to fully verify the completeness and accuracy of the underlying inputs used in the District’s MOE calculation. Although other audit procedures \did not identify actual noncompliance with MOE requirements for the period under audit, the District did not maintain adequate documentation of evidence to be in compliance with this requirement. Cause – The District’s controls over budgetary inputs, specifically regarding MOE documentation and retention were not designed or operating effectively. Contributing factors appear to include one or more of the following: • Lack of formal written procedures addressing preparation, review and retention of MOE calculation support; • Insufficient monitoring or supervisory review to ensure the calculation was fully supported and reconciled to underlying records; and/or • Staff turnover or limited training regarding budgetary input and documentation expectations for federal compliance requirements. Effect – The absence of adequate supporting documentation creates a reasonable possibility that material noncompliance with the MOE requirement could occur and not be prevented, or detected and corrected, on a timely basis. In addition, the District’s ability to demonstrate compliance with maintenance of effort to the pass-through entity (RIDE), federal agency, or other reviewers is impaired when the calculation cannot be fully supported. If this condition is not corrected, future periods could result in undetected MOE errors, questioned costs, repayment obligations, delays in funding, or other administrative sanctions. Questioned Costs – None Recommendation – We recommend that management establish and implement formal written procedures to ensure complete supporting documentation is prepared and maintained for all MOE calculations. At a minimum, those procedures should require: • Clearly identified sources of data used in calculation; • Documentation of methodology used in the MOE calculation provided annually to the pass-through entity; • Retention of detailed budget vs actual expenditure reports in accordance with the Uniform Chart of Accounts and other underlying support; • Reconciliations of calculation inputs to the general ledger or other accounting records; • Independent review and approval of the completed MOE calculation and supporting workpapers prior to submission Management’s Response – Management acknowledges the lapse in internal controls and the lack of documented procedures regarding MOE preparation, review, and retention of MOE calculation support in FY 2025. Corrective Action: This issue was addressed and corrected during FY2026. Specifically, we have implemented the following: 1. A formal written procedure on the MOE calculation describing the methodology, data sources, document retention, review and approvals. 2. UCOA training has been provided to secretarial staff and school administrators involved in related processes to ensure proper coding of expenses. 3. Implementation of new approval chains to review and approve the UCOA coding to ensure proper coding of expenses. 4. Monthly transaction reconciliations. Expected Completion: The corrective actions have been substantially competed as of this writing. Final completion expected by June 30, 2026

Federal Agency: Department of Housing and Urban Development (HUD) Federal Program: 14.228 COVID-19 - Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii 2020 - B-20-DW-29-0001 14.228 Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii 2017 - B-17-DC-29-0001 2018 - B-18-DC-29-0001, B-18-DP-29-0001, and B-18-DP-29-0002 2019 - B-19-DC-29-0001 and B-19-DP-29-0001 2020 - B-20-DC-29-0001 2021 - B-21-DC-29-0001 2022 - B-22-DC-29-0001 State Agency: Department of Economic Development (DED) Type of Finding: Internal Control (Significant Deficiency) and Nonmaterial Noncompliance Compliance Requirement: Reporting DED controls and procedures are not sufficient to fully comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements for the Community Development Block Grant (CDBG) program. During state fiscal year 2025, the DED did not fully comply with FFATA reporting requirements for 18 of 27 subawards reviewed. During state fiscal year 2025, the DED disbursed approximately $56.2 million in first-tier subawards to 178 subrecipients of the CDBG program. First-tier subaward payments accounted for approximately 97% of the program's expenditures. The FFATA requires comprehensive reporting for certain federal awards to promote transparency and accountability over the use of the federal funds. Regulation 2 CFR Part 170, Appendix A, requires the DED to report first-tier subawards of $30,000 or more no later than the end of the month following the month in which the subaward was made. The regulation provides "[t]he recipient must also report a subaward if a modification increases the Federal funding to an amount that equals or exceeds $30,000. All reported subawards should reflect the total amount of the subaward." Information is reported to System for Award Management (SAM.gov) (the FFATA Subaward Reporting System [FSRS.gov] prior to March 2025) and is publicly available at USAspending.gov. The DED issues CDBG program subawards to local governments, such as counties and cities, for multiple-year periods. Due to the nature of the subawards and because the DED can spend federal awards over a several-year period (typically 8 federal fiscal years), the DED continuously modifies and updates subaward amounts and sources as subaward terms and conditions change, and as federal awards are reallocated to the subawards. Modifications to subawards impact FFATA reporting, and uncorrected reporting errors can carry forward for many years. To test compliance with FFATA reporting requirements, we reviewed a random sample of 27 CDBG subawards, totaling $18,598,846, that were active during the year ended June 30, 2025. For each subaward tested, we reviewed the original issuance and any applicable modifications, including issuances/modifications that occurred before the year ended June 30, 2025 (our review for timeliness of reporting was limited to the year ended June 30, 2025). Of the 27 subawards, 18 (67%) had instances of noncompliance (11 of which had at least 1 instance during the year ended June 30, 2025), as shown in the following table: In addition to the errors noted in the table, FFATA reports for 11 of 27 (41%) subawards did not report the correct federal award identification number (FAIN), or correct combination of FAINs. As a result, some or all of the subaward amounts were reported under incorrect federal award year(s). The following example explains 1 subaward that had multiple types of errors as of auditors' testing through February 2026: When the subaward totaling $957,409 was issued in April 2021, the DED timely and correctly completed FFATA reporting for $957,409, but reported the incorrect FAIN (federal award year 2019 instead of 2018). When the subaward was modified in August 2024, increasing the amount by $121,179, to $1,078,588, the DED correctly reported the increase amount and the FAIN, but completed FFATA reporting 1 month late. When the subaward was again modified in April 2025, decreasing the amount by $15,000, to $1,063,588, the DED did not complete any FFATA reporting. As a result, the subaward was overstated by $15,000 on USAspending.gov, and approximately 90% of the total amount was reported under an incorrect federal award year. Many FFATA reporting errors noted were associated with subaward modifications. Each of the 27 sampled subawards remained above $30,000 following each modification. DED personnel disagreed with some of the errors associated with modifications because they believe FFATA reporting is only required for subaward increases of $30,000 or more, regardless of the resulting subaward amount. They further stated they believe FFATA reporting is not required for any decreases of subaward amounts. However, the FFATA clearly states reporting is required if the modification results in a subaward amount that equals or exceeds $30,000 and that the total subaward amount should be reflected. Without adequate internal control over FFATA reporting, there is less assurance the information included in the FFATA reporting is complete, accurate, and submitted timely. In addition to noncompliance with federal requirements, FFATA inaccuracies increase the risk that those using the reports could rely on incomplete information. Regulation 2 CFR Section 200.303(a) requires recipients to "[e]stablish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Recommendation The DED strengthen internal controls to ensure information is timely and accurately reported for the CDBG program and complete FFATA reporting in accordance with the applicable requirements. Auditee's Response We partially agree with the auditor's finding. Our Corrective Action Plan includes an explanation and specific reasons for our disagreement and any planned actions to address the finding. Auditor's Comment The DED Corrective Action Plan (CAP) states the DED partially agrees with the recommendation, and provides the following 4 arguments: (1) The DED disagrees with the inclusion of errors in the audit report that were related to subawards executed prior to the audit period (year ended June 30, 2025), and believes the correct audit population should only include new subawards and amendments executed during the audit period, rather than all active subawards. However, as noted in the finding, due to the nature of the subawards (including DED's continuous modifications over a several year period), and the risk that uncorrected reporting errors can carry forward for many years, we reviewed a sample of subawards that were active during the year ended June 30, 2025. It was necessary to review the subaward, including original issuance and any applicable modifications, in entirety to determine the accuracy of FFATA reporting. Ignoring some activity could have led to inaccurate conclusions. (2) The DED believes the finding is inconsistent with the regulatory intent regarding systemic noncompliance because the DED corrected certain FFATA reporting discrepancies prior to and during the audit period. However, as reported in the finding, these corrections did not fully address all FFATA discrepancies. In addition, this argument disregards the auditor's responsibility to follow criteria outlined in 2 CFR 200.516 (Uniform Guidance) for reporting audit findings. The DED's insufficient internal controls and noncompliance with FFATA reporting requirements are systemic in nature; and therefore, the finding is classified as a significant deficiency in internal control, which is required to be reported. (3) Under the DED's literal interpretation of 2 CFR Part 170, Appendix A, DED personnel believe the DED does not have to report any deobligations (decreases of subaward amounts) and it only has to report subaward increases of $30,000 or more, regardless of the resulting subaward amount. (4) The DED disagrees subawards were reported in the incorrect federal award year (FAIN) because DED personnel do not believe they have to report modifications to FAIN information that occur after the initial award. Arguments (3) and (4) directly conflict with the FFATA's stated goal, which is "[t]o require full disclosure of all entities and organizations receiving federal funds." Further, the OMB Compliance Supplement defines "amount of subaward" as "[t]he net dollar amount of federal funds awarded to the subawardee including modifications." In addition to noncompliance, not reporting (a) deobligations, (b) all modifications that result in a subaward amount that equals or exceeds $30,000, and (c) FAIN modifications, prevents users from accessing complete and accurate information. The following example further illustrates the impact of inaccurate FFATA reporting by the DED. In our review of some subawards associated with FAIN B-19-DC-29-0001 (one of the DED's federal awards during the 2019 federal award year), we observed the USASpending.gov website showed the DED received $22.6 million in federal award funding, but awarded $95.9 million in subawards of these federal funds, over 4 times the federal award amount. Incomplete and inaccurate FFATA reporting leads to limited accuracy and transparency to the public. Until the errors are corrected, the DED's FFATA reporting will remain erroneous in future years.

Non-major program, reported in accordance with 2 CFR 200.516(a) (4)) Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public Housing Capital Fund Program Federal Assistance Listing Numbers: 14.872 Noncompliance - C. Cash Management Non Compliance Material to the Financial Statements: Yes Material Weakness in Internal Control over Compliance for Cash Management Criteria: In accordance with 2 CFR 200.305, payment methods for federal awards must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds by the recipient. Federal funds drawn under the Public Housing Capital Fund Program should be limited to amounts needed to meet the Authority’s immediate cash requirements for allowable program expenditures. Accordingly, the Authority should implement procedures to ensure grant funds are not drawn in advance of actual or imminent eligible expenditures. Condition: The Authority drew down federal funds in advance of immediate cash needs for allowable program expenditures. As of year end, a portion of the funds drawn remained unexpended and was reported as unearned revenue in the financial statements. This indicates that federal funds were received prior to the incurrence of eligible expenditures. Context: During review of the financial statements, the Authority was noted to have unexpended federal funds on hand at year end that had been drawn prior to the disbursement of allowable program costs. Specifically, amounts recorded as unearned revenue represented federal funds received in advance of immediate cash needs. This condition was identified through review of drawdown activity, general ledger balances, and year end financial reporting records. Known Questioned Costs: $828,938* * Represents federal funds drawn under the Public Housing Capital Fund Program in advance of immediate cash needs, which remained unexpended at year end and are not in compliance with cash management requirements under 2 CFR 200.305. Cause: The Authority did not have adequate procedures in place to monitor the timing of grant drawdowns in relation to actual program cash needs and allowable expenditures. As a result, federal funds were requested and received prior to the incurrence of eligible costs under the Public Housing Capital Fund Program. Effect: The Authority was not in compliance with federal cash management requirements governing the timing of federal fund drawdowns. As a result, federal funds were held in advance of immediate cash needs, increasing the risk of improper cash management and noncompliance with Uniform Guidance and HUD requirements. Recommendation: We recommend the Authority strengthen its cash management procedures to ensure federal funds are drawn only for immediate cash needs related to allowable program expenditures. Management should implement monitoring and review controls over grant drawdown activity, including periodic reconciliation of drawdowns to incurred expenditures, to ensure compliance with 2 CFR 200.305 and HUD requirements.

Finding 2025-003 (Non-major program, reported in accordance with 2 CFR 200.516(a) (4)) Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public Housing Capital Fund Program Federal Assistance Listing Numbers: 14.872 Noncompliance - B. Allowable Costs/Cost Principles Non Compliance Material to the Financial Statements: Yes Material Weakness in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: In accordance with 2 CFR Part 200, Subpart E – Cost Principles, costs charged to a federal award must be reasonable, necessary, allowable, and properly documented, and must be allocated and classified in accordance with applicable federal cost principles. The Authority is responsible for ensuring that expenditures charged to the Public Housing Capital Fund Program are allowable under program requirements and supported by adequate documentation in accordance with applicable federal regulations. In addition, capital assets acquired or constructed with federal funds must meet capitalization criteria in accordance with accounting principles generally accepted in the United States of America, including sufficient documentation to support the nature of the expenditure and its eligibility for capitalization rather than current period expense. Condition: The Authority recorded certain expenditures funded through the Public Housing Capital Fund Program as capital asset additions during the year ended March 31, 2025. These expenditures were not supported by sufficient documentation to demonstrate that they were allowable program costs and met the criteria for capitalization under applicable program requirements. As a result, audit adjustments were recorded to reclassify these amounts from capital assets to current period expense. This indicates that the costs initially charged to the Public Housing Capital Fund Program were not adequately supported at the time of recording to substantiate their eligibility and proper classification. Context: During our audit of the Authority’s Public Housing Capital Fund Program, expenditures for the year ended March 31, 2025, we identified expenditures of $763,370 that were initially recorded as capital asset additions. These expenditures were not adequately supported in accordance with applicable Public Housing Capital Fund Program requirements to substantiate their eligibility and proper classification. Known Questioned Costs: $763,370* * Represents expenditures charged to the Public Housing Capital Fund Program that lacked sufficient documentation to support allowability and/or proper classification as capital asset additions in accordance with program requirements and applicable cost principles. Cause: The Authority did not have adequate procedures in place to ensure that sufficient supporting documentation was obtained and evaluated to support both the allowability of the costs under program requirements and their classification as capital assets. Effect: As a result, capital assets, and net position were misstated and expenses were understated, as expenditures that did not meet capitalization criteria or were not sufficiently supported under program requirements were initially recorded as capital asset additions. This condition also increases the risk that expenditures charged to the Public Housing Capital Fund Program may not be properly supported or appropriately classified in accordance with applicable requirements. Recommendation: We recommend that the Authority strengthen its internal controls over Public Housing Capital Fund Program expenditures by enhancing its review process to ensure that all costs recorded as capital asset additions are properly supported and meet applicable program requirements.

Federal Program Title: Medical Assistance Assistance Listing Number: 93.778 Federal Award Identification and Year: 2405MN5ADM, 2405MN5MAP Compliance Requirement Affected: Allowable Cost and Activity Award Period: Year Ended December 31, 2024 Type of Finding: Material Weakness in Internal Control over Compliance and Other Matters Criteria or Specific Requirement: In accordance with Uniform Guidance 2 CFR 200.516(a), management is responsible for establishing and maintaining internal controls, including proper review of disbursements prior to payment being made with federal funding. Condition: As part of the audit, key controls over significant audit areas are reviewed to ensure they are properly performed. We were not presented with documentation for one of the forty disbursements tested to show that the disbursement was reviewed by a supervisor prior to payment. Questioned Costs: None. Context: During Allowable Cost testing it was noted that one of the forty transactions tested was not reviewed and approved by a supervisor. Cause: The County has a limited number of personnel and there was significant turnover at the County. Effect: The County controls are not operating as designed. Repeat Finding: No. Recommendation: We recommend the County implement procedures to ensure that all disbursements are reviewed and approved prior to payment. Views of responsible officials: There is no disagreement with the audit finding.

Federal Program Title: Medical Assistance Assistance Listing Number: 93.778 Federal Award Identification and Year: 2405MN5ADM, 2405MN5MAP Compliance Requirement Affected: Allowable Cost and Activity Award Period: Year Ended December 31, 2024 Type of Finding: Material Weakness in Internal Control over Compliance and Other Matters Criteria or Specific Requirement: In accordance with Uniform Guidance 2 CFR 200.516(a), management is responsible for establishing and maintaining internal controls, including proper review of disbursements prior to payment being made with federal funding. Condition: As part of the audit, key controls over significant audit areas are reviewed to ensure they are properly performed. We were not presented with documentation for one of the forty disbursements tested to show that the disbursement was reviewed by a supervisor prior to payment. Questioned Costs: None. Context: During Allowable Cost testing it was noted that one of the forty transactions tested was not reviewed and approved by a supervisor. Cause: The County has a limited number of personnel and there was significant turnover at the County. Effect: The County controls are not operating as designed. Repeat Finding: No. Recommendation: We recommend the County implement procedures to ensure that all disbursements are reviewed and approved prior to payment. Views of responsible officials: There is no disagreement with the audit finding.

Criteria 2 CFR 200 establishes that the auditee must establish and maintain effective internal controls over the federal awards that provide assurance that the entity is managing the federal awards in compliance with federal statutes, regulations, and the conditions of the federal award. 2 CFR section 200.516(a) require the auditee to collect financial information and monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved and report these items in accordance with the program requirements. Condition Final financial report were not completed and submitted for 5NU61TS000295-05 award by the due date. Cause CARD failed to file the final financial report on a timely basis. Context/Sampling The final financial report was filed late. Effect Lack of compliance with designed internal controls over reporting could result in CARD reporting incorrect or incomplete information. The required final financial report was not filed by the due date. Questioned Costs None reported. Recommendation We recommend that CARD submit all reports in timely manner. This will ensure CARD is in compliance with the award and CARS’s policies. Organization Response The Organization has added all report due dates to their calendars to ensure that reports are filed in a timely manner.

CONDITION: During the calendar year 2024, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2023-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City.Findings and questioned costs related to Federal Awards which are required to be reported in accordance with the Uniform Guidance 2 CFR 200.516(a):CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

Finding 2024-003: Inaccurate Reporting of SLFRF Expenditures and Fiscal Year End Federal Program: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Assistance Listing Number (ALN): 21.027 Federal Agency: U.S. Department of the Treasury Type of Finding: Compliance and significant deficiency in internal control over compliance Criteria: Per Uniform Guidance (2 CFR 200.510(b) and 2 CFR 200.516), recipients must accurately report expenditures and obligations in required annual compliance reports. Reports must also reflect the correct fiscal year end date as required by federal and state reporting standards. Context: Morgan County is a recipient of SLFRF funding and is required to submit accurate annual compliance reports reflecting actual expenditures and the correct fiscal year end. For the reporting period ending March 31, 2025, the County elected the $10 million standard allowance for revenue loss and was required to report all SLFRF expenditures incurred during the year ended December 31, 2024. Condition: The County’s SLFRF compliance report for the year ended December 31, 2024 included several clerical errors including incorrectly reporting there were $0 in current period expenditures rather than the $1,660,202 included on the Schedule of Expenditures of Federal awards as well as incorrectly listing the fiscal year end date as December 31, 2023. Cause: The errors appear to be due to insufficient oversight in preparing the annual compliance report due to staffing issues within the County. Effect: The inaccurate reporting resulted in noncompliance with federal and state reporting requirements. This may impact the transparency and accountability of SLFRF fund usage. Questioned Costs: None Recommendation: Morgan County should implement procedures to ensure accurate reporting of expenditures and correct fiscal year end dates in all future SLFRF compliance reports. The County should ensure that all future reports are reconciled to actual activity and comply with SLFRF and Uniform Guidance requirements. Views of Responsible Officials: Management concurs with the finding and will address the issue as outlined in the corrective action plan included in this report

Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2024-001: Cash Management (Material Weakness) Federal Programs: ALN 19.019 Criteria: According to 2 CFR 200.305, recipients must draw Federal funds only in amounts necessary to meet immediate cash needs for program expenditures. Funds should be disbursed as soon as possible, generally within three business days of receipt. Condition: During our testing of cash management compliance, we noted that ICMEC drew down a total of $233,494 on Federal funds in advance of need. The remaining funds were used for other ICMEC programmatic work. Cause: ICMEC did not have adequate procedures to align Federal drawdown requests with immediate program disbursement requirements. Drawdowns were based on budgeted monthly cash needs rather than actual expenditures. Effect or Potential Effect: Drawing funds in advance of need results in excess Federal cash being held by ICMEC, which is not permitted under Federal regulations. This increases the risk of misuse of Federal funds and may result in ICMEC owing interest to the Federal Government. Questioned Costs: $233,494 Context: Our audit procedures consisted of testwork completed on individual cash receipts and draw downs requests and evaluating the refundable advance analysis prepared by ICMEC as of December 31, 2024. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend ICMEC establish and implement procedures to ensure drawdown requests are limited to actual, immediate cash needs, with monitoring to confirm that Federal funds are disbursed within three business days of receipt.

Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) (Continued) Finding 2024-002: Late Submission of Audit Report to the Federal Audit Clearinghouse (Significant Deficiency) Federal Programs: All Federal programs Criteria: The Uniform Guidance, specifically 2 CFR 200.512(a), establishes the filing requirements for the submission of single audits to the Federal audit clearing house and indicates that the single audit reporting package must be submitted 30 days after the date of the auditor's report(s) or 9 months after the end of the fiscal year, whichever comes first. Condition: The single audit reporting package for ICMEC December 31, 2023 year-end audit was due to the Federal audit clearinghouse by September 30, 2024. However, the data collection form was submitted on February 24, 2025. Cause: During the 2023 audit process, fieldwork timelines had to be extended to accommodate the time ICMEC needed to ensure that all schedules were properly reconciled and supported, which caused delays in the audit completion. As a result, the 2023 auditor's report(s) were dated January 30, 2025. Effect or Potential Effect: Not timely filing the single audit reporting package is indicative of timeliness issues with the audit process. Questioned Costs: None noted. Context: As a result of delays in the completion of the 2023 audit, the single audit reporting package for the year ended December 31, 2023, was not submitted timely. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that management implement procedures and control processes to ensure that future audits are completed timely so that the single audit reporting package is submitted by the appropriate deadline of either 30 days after the date of the auditor's report(s) or 9 months after the end of the fiscal year, whichever comes first.

Federal agency: U.S. Department of the Treasury Federal program title: Coronavirus Capital Projects Fund Assistance Listing (ALN): 21.029 Pass-through agency: State of Delaware Period of performance: Through December 31, 2026 Finding Number: 2024-001 Type of finding: - Significant Deficiency in Internal Control over Compliance, and - Noncompliance with 2 CFR §200.510(b) (SEFA completeness) Criteria or Specific Requirement: - SEFA content and completeness. Under 2 CFR §200.510(b), the auditee must prepare a complete Schedule of Expenditures of Federal Awards (SEFA) listing each federal program by federal agency and ALN, and for subawards, the pass-through entity’s name and identifying number. - Auditor reporting. Audit findings must be reported under 2 CFR §200.516(a) when there is material noncompliance and/or significant deficiencies/material weaknesses related to federal programs. Condition: During the audit, we noted that the Organization’s initial SEFA did not include all federal pass-through awards, including certain U.S. Department of the Treasury – Coronavirus Capital Projects Fund (ALN 21.029) subawards administered by the state of Delaware. The additional federal awards were identified by the auditors and subsequently added to the SEFA prior to report issuance. Questioned Costs: None were identified as part of this finding. Context: The omission was identified during SEFA procedures and major program determination. Because the SEFA is the basis for planning and selecting major programs, initial incompleteness could have affected major program determination and compliance testing. (SEFA must include ALN, pass-through, and award IDs per 2 CFR §200.510(b); audit findings are required to be reported per §200.516(a).) Cause: Controls over SEFA preparation and federal award identification were not sufficient to ensure all pass-through federal awards (including ARPA CPF) were captured with required identifiers (federal agency, ALN 21.029, pass-through name/number) before year-end reporting. Effect: An initially incomplete SEFA increases the risk that: - major programs are not properly identified for testing (§200.518) - the auditor may need to modify the SEFA in-relation-to opinion or compliance opinion if not corrected before report issuance (§200.515). - cause a delay in the audit Repeat Finding: No Recommendation: We recommend management implement (and document) SEFA preparation controls to ensure completeness and accuracy, including: 1. Maintaining a central grant repository containing award documents with federal agency, ALN (21.029), FAIN/prime award, pass-through entity, pass-through ID(s), period of performance, and award amounts. 2. Performing a year-end SEFA reconciliation from the general ledger and grant subledger to the repository, confirming all pass-through awards are captured with required ALN and identifiers per §200.510(b). 3. Obtaining written ALN/FAIN confirmations from pass-through entities for any awards lacking federal identifiers and retaining those confirmations in the grant file. Views of Responsible Officials: Christina Cultural Center experienced a SEFA completeness finding during a year with bookkeeping turnover, which affected the initial compilation of federal award activity. In response, management worked closely with the audit team to confirm the complete listing of awards, validate pass-through entity details, and support accurate SEFA presentation. The organization has also identified cross-training as a key next step to strengthen continuity and reduce key-person dependency going forward.

Finding 2024-001: Known questioned costs related to eligibility Major Program: Housing Choice Voucher Program Federal Agency: U.S. Department of Housing and Urban Development Assistant Listing Number: 14.871 Criteria: The OMB Compliance Supplement for the Housing Choice Voucher Program (HCVP) states that the HCVP regulations are found in 24 CFR parts 5, 982, 983, and 985. 24 CFR 982.306(d) states that “The PHA must not approve a unit if the owner is the parent, child, grandparent, grandchild, sister, or brother of any member of the family, unless the PHA determines that approving the unit would provide reasonable accommodation for a family member who is a person with disabilities. This restriction against PHA approval of a unit only applies at the time a family initially receives tenant-based assistance for occupancy of a particular unit but does not apply to PHA approval of a new tenancy with continued tenant-based assistance in the same unit.” 2 CFR 200.516(a)(3) requires an audit finding to be reported for known questioned costs that are greater than $25,000 for a type of compliance requirement for a major program. Condition: As a result of our audit of the HCVP eligibility compliance requirement, it was noted that one (1) out of forty (40) participants reviewed did not meet the eligibility requirement because the tenant was a relative of the owner of the unit. Homeowner’s may apply for a reasonable accommodation for a family member who is a person with disabilities, however the owner did not request a reasonable accommodation. The owner and tenant were approved in May 2018, and payments began in June 2018. Cause: The City approved a housing choice voucher to a tenant that was ineligible due to being a relative of the owner because the City was unaware of the relationship between the owner and tenant upon approval of the housing choice voucher. The was unaware of the unallowed relationship because the owner and tenant certified that they were not related by signing the HUD-52517 form Request for Tenancy Approval that includes an owner’s certification that the owner is not the parent, child, grandparent, grandchild, sister or brother of any member of the family, unless the PHA has determined (and has notified the owner and the family of such determination) that approving leasing of the unit, notwithstanding such relationship, would provide reasonable accommodation for a family member who is a person with disabilities. Effect or Potential Effect: The City issued payments for a housing choice voucher to an ineligible owner and tenant since June 2018. Known Questioned Costs: $69,019 from June 2018 through September 2024. Current fiscal year known questioned costs were $11,712. The questioned costs are all payments made to the owner on behalf of the tenant mentioned above. Context: The auditor believes that the audit finding is an isolated instance and not a systemic problem. The City has appropriate internal controls, including inquiry of applicants as to whether they are related and obtains signed certifications that the owner and tenant are not related. In addition, the relationship was discovered through procedures that are not required by the Department of Housing and Urban Development. The finding was due to misrepresentations provided by the owner and tenant, and through other audit procedures there were no indications that this was a systematic issue. The sample selected was a valid sample and the City is still in overall compliance with the eligibility requirement for the HCVP major program. Repeat finding: No Recommendation: We recommend the City continue to clearly communicate to housing owners that they cannot rent to relatives, and to implement additional procedures over eligibility compliance on a sample basis going forward with regards to potential ineligible relationships between the owner and tenant. Examples of potential additional procedures include internet searches of the owner and tenant. View of Responsible Officials: See corrective action plan on page 9

Finding 2024-001: Significant Deficiency and known questioned costs related to activities allowed or unallowed and allowable costs/cost principles Major Program: HOME Investment Partnership Program Federal Agency: U.S. Department of Housing and Urban Development Assistant Listing Number: 14.239 Criteria: The City is responsible for ensuring compliance with all applicable provisions of the HOME Investment Partnerships Program (HOME) as prescribed by the U.S. Department of Housing and Urban Development. According to requirements included in the OMB Compliance Supplement, all HOME Funds may be used by participating jurisdictions to provide for: (a) incentives to develop and support affordable rental housing and homeownership affordability through the acquisition, new construction, reconstruction, or rehabilitation of non-luxury housing with suitable amenities, including real property acquisition, site improvements, conversion, demolition, and other expenses, including financing costs, relocation expenses of any displaced persons, families, businesses, or organizations; (b) tenant-based rental assistance, including security deposits; (c) the payment of reasonable administrative and planning costs; and (d) the payment of operating expenses of Community Housing Development Organizations (CHDOs). The housing must be permanent or transitional. The acquisition of vacant land or demolition can only be undertaken with respect to a particular housing project intended to provide affordable housing, and when construction is expected to begin within 12 months. Conversion of an existing structure to affordable housing is rehabilitation unless certain circumstances exist. Manufactured housing may be purchased or rehabilitated and the land upon which it is built may be purchased with HOME funds. HOME funds may be used to pay for development construction hard costs, refinancing costs, acquisition costs, related soft costs, CHDO costs, relocation costs, and costs related to the repayment of loans (24 CFR sections 92.205(a) and 92.206).” 2 CFR 200.516(a)(3) requires an audit finding to be reported for known questioned costs that are greater than $25,000 for a type of compliance requirement for a major program. Condition and Context: During testing of HOME activities allowed or unallowed and allowable costs/cost principles (AB) compliance requirements, it was noted that one (1) out of thirty-nine (39) disbursement transactions reviewed did not meet the AB compliance requirements. 2 CFR 200.305(b)(8) states that “a payment must not be made to a recipient or subrecipient for amounts that the recipient or subrecipient withholds from contractors to assure satisfactory completion of work. Payment must be made when the recipient or subrecipient disburses the withheld funds to the contractors or to escrow accounts established to ensure satisfactory completion of work.” The City requested reimbursement for retainage amounts that were not released as of September 30, 2024. Cause: The City had turnover in the project manager department related to HOME construction projects. The project manager turnover caused a miscommunication between the project managers and grant accounting employees which resulted in the request for reimbursement of retainage that had not yet been paid by the City. Effect or Potential Effect: The City received grant reimbursements related to expenditures that were not paid as of September 30, 2025. Known Questioned Costs: $112,539 from October 1st, 2023 through September 30th, 2024. These are for all projects that retainage was requested for reimbursement but the retainage was not released as of September 30, 2024. Repeat Finding: No Recommendation: We recommend the City continue to train its employees to on allowable activities and costs related to the HOME grant. View of Responsible Officials: See Corrective Action Plan on page 10

FINDING 2024-033 CCDF Cluster, ALN 93.575 and 93.596, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Client Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MiLEAP and MDHHS did not ensure compliance with federal laws and regulations relating to client eligibility for CCDF Cluster child care payments for 5 (8%) of the 60 cases we reviewed. Our review disclosed: a. MDHHS case record documentation was inconsistent with client eligibility information entered in Bridges for 5 (8%) of 60 cases reviewed. For these cases, the authorized hours of care in Bridges exceeded the client's documented need for hours of child care services. b. MDHHS did not appropriately categorize the client's eligibility based on the supporting documentation in the case record for 1 (2%) of 60 cases reviewed, which is also reported in part a. We determined this did not affect the client's eligibility for child care services or level of benefits. Criteria Federal regulation 45 CFR 98.20 provides eligibility requirements for child care services and permits MiLEAP to establish eligibility requirements in addition to those outlined in the section as long as the additional requirements are not in violation of the regulation. Federal regulation 45 CFR 98.16(i)(5) requires MiLEAP identify additional eligibility requirements in its CCDF State Plan. MiLEAP's CCDF State Plan for Federal Fiscal Years 2022-2024 provides specific requirements for client, child, and provider eligibility. Also, CCDF program policy deems clients are either income eligible or categorically eligible if they participate in certain other programs such as Foster Care - Title IV. The client's income or categorical eligibility determines the client's level of benefits, and the child must be assigned to an eligible provider. Federal regulation 45 CFR 98.55 allows states to claim expenditures to be matched at the FMAP rate for allowable activities, as described in the approved state plan. In order to receive federal matching funds for a fiscal year, states must also expend an amount of nonfederal funds for child care activities in the state at least equal to the state's share of expenditures for the fiscal years 1994 or 1995 (whichever is greater) under Sections 402(g) and 402(i) of the federal Social Security Act as these sections were in effect before October 1, 1995, and the expenditures must be for allowable services or activities, as described in the approved state plan. Cause MDHHS informed us its internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered all required verification documentation in the client's case record to support eligibility.   Effect MiLEAP may have made payments on behalf of ineligible clients. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $586 - federal share. • $257 - State share of costs MiLEAP inappropriately used as matching. Recommendation We recommend MiLEAP and MDHHS maintain sufficient documentation and ensure Bridges appropriately reflects documentation to support client eligibility was determined in accordance with eligibility requirements. Management Views MiLEAP and MDHHS agree with the finding.

FINDING 2024-033 CCDF Cluster, ALN 93.575 and 93.596, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Client Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MiLEAP and MDHHS did not ensure compliance with federal laws and regulations relating to client eligibility for CCDF Cluster child care payments for 5 (8%) of the 60 cases we reviewed. Our review disclosed: a. MDHHS case record documentation was inconsistent with client eligibility information entered in Bridges for 5 (8%) of 60 cases reviewed. For these cases, the authorized hours of care in Bridges exceeded the client's documented need for hours of child care services. b. MDHHS did not appropriately categorize the client's eligibility based on the supporting documentation in the case record for 1 (2%) of 60 cases reviewed, which is also reported in part a. We determined this did not affect the client's eligibility for child care services or level of benefits. Criteria Federal regulation 45 CFR 98.20 provides eligibility requirements for child care services and permits MiLEAP to establish eligibility requirements in addition to those outlined in the section as long as the additional requirements are not in violation of the regulation. Federal regulation 45 CFR 98.16(i)(5) requires MiLEAP identify additional eligibility requirements in its CCDF State Plan. MiLEAP's CCDF State Plan for Federal Fiscal Years 2022-2024 provides specific requirements for client, child, and provider eligibility. Also, CCDF program policy deems clients are either income eligible or categorically eligible if they participate in certain other programs such as Foster Care - Title IV. The client's income or categorical eligibility determines the client's level of benefits, and the child must be assigned to an eligible provider. Federal regulation 45 CFR 98.55 allows states to claim expenditures to be matched at the FMAP rate for allowable activities, as described in the approved state plan. In order to receive federal matching funds for a fiscal year, states must also expend an amount of nonfederal funds for child care activities in the state at least equal to the state's share of expenditures for the fiscal years 1994 or 1995 (whichever is greater) under Sections 402(g) and 402(i) of the federal Social Security Act as these sections were in effect before October 1, 1995, and the expenditures must be for allowable services or activities, as described in the approved state plan. Cause MDHHS informed us its internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered all required verification documentation in the client's case record to support eligibility.   Effect MiLEAP may have made payments on behalf of ineligible clients. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $586 - federal share. • $257 - State share of costs MiLEAP inappropriately used as matching. Recommendation We recommend MiLEAP and MDHHS maintain sufficient documentation and ensure Bridges appropriately reflects documentation to support client eligibility was determined in accordance with eligibility requirements. Management Views MiLEAP and MDHHS agree with the finding.

FINDING 2024-033 CCDF Cluster, ALN 93.575 and 93.596, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Client Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MiLEAP and MDHHS did not ensure compliance with federal laws and regulations relating to client eligibility for CCDF Cluster child care payments for 5 (8%) of the 60 cases we reviewed. Our review disclosed: a. MDHHS case record documentation was inconsistent with client eligibility information entered in Bridges for 5 (8%) of 60 cases reviewed. For these cases, the authorized hours of care in Bridges exceeded the client's documented need for hours of child care services. b. MDHHS did not appropriately categorize the client's eligibility based on the supporting documentation in the case record for 1 (2%) of 60 cases reviewed, which is also reported in part a. We determined this did not affect the client's eligibility for child care services or level of benefits. Criteria Federal regulation 45 CFR 98.20 provides eligibility requirements for child care services and permits MiLEAP to establish eligibility requirements in addition to those outlined in the section as long as the additional requirements are not in violation of the regulation. Federal regulation 45 CFR 98.16(i)(5) requires MiLEAP identify additional eligibility requirements in its CCDF State Plan. MiLEAP's CCDF State Plan for Federal Fiscal Years 2022-2024 provides specific requirements for client, child, and provider eligibility. Also, CCDF program policy deems clients are either income eligible or categorically eligible if they participate in certain other programs such as Foster Care - Title IV. The client's income or categorical eligibility determines the client's level of benefits, and the child must be assigned to an eligible provider. Federal regulation 45 CFR 98.55 allows states to claim expenditures to be matched at the FMAP rate for allowable activities, as described in the approved state plan. In order to receive federal matching funds for a fiscal year, states must also expend an amount of nonfederal funds for child care activities in the state at least equal to the state's share of expenditures for the fiscal years 1994 or 1995 (whichever is greater) under Sections 402(g) and 402(i) of the federal Social Security Act as these sections were in effect before October 1, 1995, and the expenditures must be for allowable services or activities, as described in the approved state plan. Cause MDHHS informed us its internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered all required verification documentation in the client's case record to support eligibility.   Effect MiLEAP may have made payments on behalf of ineligible clients. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $586 - federal share. • $257 - State share of costs MiLEAP inappropriately used as matching. Recommendation We recommend MiLEAP and MDHHS maintain sufficient documentation and ensure Bridges appropriately reflects documentation to support client eligibility was determined in accordance with eligibility requirements. Management Views MiLEAP and MDHHS agree with the finding.

FINDING 2024-012 Medicaid Cluster, ALN 93.775, 93.777, and 93.778 and Children's Health Insurance Program, ALN 93.767 - Beneficiary Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure or demonstrate compliance with federal laws and regulations relating to beneficiary eligibility for 7 (12%) of 60 Medicaid and 33 (55%) of 60 CHIP cases. Our review disclosed: a. MDHHS did not determine beneficiary eligibility in accordance with eligibility requirements for 2 (3%) of 60 Medicaid and 10 (17%) of 60 CHIP cases reviewed. b. MDHHS did not maintain case file documentation supporting the beneficiary eligibility determination; examples of documentation include MAGI-based income verification results, other income support, and signed applications for 4 (7%) of 60 Medicaid and 23 (38%) of 60 CHIP cases reviewed. c. MDHHS did not determine beneficiary eligibility within the required time frame for 1 (2%) of 60 Medicaid cases reviewed. Criteria Federal regulations 42 CFR 435.1002(b) and 42 CFR 457.622(d) indicate federal funding is available only for services provided to eligible beneficiaries. Federal regulations 42 CFR 435.914 and 42 CFR 457.965 require case record documentation be maintained to support the eligibility decision. Federal regulations 42 CFR 435.10, 42 CFR 457.50, and 42 CFR 457.70 require MDHHS to specify in its State Plan the groups to whom Medicaid and CHIP are provided and the conditions of eligibility for individuals in those groups. Federal regulation 42 CFR 435.912(c) requires MDHHS to determine eligibility and provide notice of the decision within 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. MDHHS Bridges Administrative Manual 300, The Case Record, indicates a case record includes documents and information related to a given case arranged in a series of packets and contained in a folder identified by a case name, grantee ID, or case number. A case record consists of both paper case records and electronic case files (ECF). The paper case record and ECF contain all forms, documents, and other evidence relevant to the group's current and past eligibility. Unless captured in Bridges the case record must document the facts essential to the eligibility determination and actions taken by the local office regarding the case. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required documentation in beneficiaries' case records to support eligibility determinations. Also, MDHHS's internal control did not ensure county/district office caseworkers timely reviewed beneficiaries' case records. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible beneficiaries and because of the 12% Medicaid and 55% CHIP error rates. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,697 - federal share. • $2,299 - State share of costs MDHHS inappropriately used as matching. Recommendations We recommend MDHHS properly consider Medicaid and CHIP eligibility documentation in accordance with eligibility requirements. We also recommend MDHHS maintain documentation to support beneficiary eligibility was determined in accordance with eligibility requirements. We further recommend MDHHS ensure eligibility determinations are made timely. Management Views MDHHS agrees with the identified exceptions for parts a. and c. of the finding. However, MDHHS disagrees that 3 Medicaid cases and 20 Children's Health Insurance Program (CHIP) cases with MAGI determinations cited in part b. did not have case file documentation supporting the beneficiary eligibility determination. The Centers for Medicare and Medicaid Services (CMS) has determined that a reasonable compatibility indicator can be used for CMS audit purposes to determine if the attested income information was electronically verified for MAGI cases and MDHHS disagrees that documentation was not maintained to support the eligibility determination. The SOM MiIntegrate system communicates with various State and federal electronic trusted data sources and sends the information from these sources, along with the beneficiaries' attested income, to the SOM MAGI Rules Engine where the MAGI eligibility determination is made. As part of the MAGI eligibility determination, a reasonable compatibility test is completed to determine if beneficiary/applicant attested income is within a specified percentage of the electronic trusted data sources or if the attested and verified income are below the threshold for the applicable program. The results of the MAGI eligibility determination are sent back to MiIntegrate using an Account Transfer (AT) packet that contains the results. MiIntegrate then communicates the results to the SOM MAGI Viewer and Bridges using an AT packet and Bridges stores the AT packet number only that can be used to view the details of the AT packet within the SOM MAGI Viewer. The version of the AT packet within the MAGI Viewer also contains a reasonable compatibility indicator that documents the outcome of the reasonable compatibility test and supports the SOM MAGI Rules Engine eligibility decision. MDHHS stores the AT packet information, including facts essential to the eligibility determination, within MiIntegrate and the MAGI Viewer instead of Bridges to help protect and secure the federal income tax data and unemployment data used for the determination. The AT packet for each individual determination can be retrieved from the MAGI Viewer using the AT packet number stored in each beneficiary's case file within Bridges. MDHHS is not aware of any federal regulations that preclude MDHHS from storing this information in a separate system to help secure the data and restrict access as required by federal and state law. Auditor's Comments to Management Views Regarding the MAGI beneficiary eligibility documentation cited in part b., the CMS's Payment Error Rate Measurement (PERM) Manual indicates if states use electronic verification to verify eligibility elements there should be an indicator in the eligibility system, i.e., Bridges, showing the State verified the element, including the result of the verification. Also, federal regulations 42 CFR 935.914 and 42 CFR 457.965 require MDHHS to maintain facts in the case file to support the eligibility determination. The AT packet number does not include the reasonable compatibility indicator. Therefore, it does not provide sufficient detail within the case file, defined by MDHHS as records captured in Bridges, to demonstrate MDHHS verified the income or the caseworker confirmed the result of the verification. Therefore, the finding stands as written.

FINDING 2024-040 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Payments on Behalf of Ineligible Beneficiaries See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure beneficiary eligibility was updated in CHAMPS. As a result, MDHHS issued $3,373 for 11 (37%) of 30 payments sampled from a $2,001,375 population of beneficiary payments with no corresponding Medicaid coverage. Criteria Federal regulation 42 CFR 435.1002(b) indicates federal funding is available only for services provided to eligible beneficiaries. Cause MDHHS informed us that because of system issues in Bridges, inaccurate eligibility information from Bridges was interfaced into CHAMPS, resulting in beneficiaries appearing eligible in CHAMPS in error and payments being processed based on that eligibility. Effect MDHHS made payments on behalf of ineligible beneficiaries. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs exceed $25,000. • $2,256 - federal share of payments made to providers on behalf of ineligible beneficiaries. • $1,117 - State share of payments made to providers on behalf of ineligible beneficiaries. Recommendation We recommend MDHHS ensure beneficiary eligibility is updated in CHAMPS. Management Views MDHHS agrees with the finding.

FINDING 2024-041 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible HHP Payments See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not prevent or timely recover payments, totaling $342, for 3 (20%) of 15 sampled clients who were hospitalized while receiving HHP services and no longer met eligibility requirements. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under HHP. MDHHS has developed the Adult Services Manual (ASM) to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 140 prohibits payment for HHP services on days a client is unavailable due to hospitalization, except the caregiver may receive payment of HHP services on the day a client is admitted to a hospital if HHP services were completed before the time the client was admitted to the hospital. Also, ASM Section 140 allows payment for HHP services on the day a client is discharged from the hospital. Cause MDHHS informed us the post-payment review process is complicated by the lag time (up to one year) associated with MDHHS receiving and processing hospital claims and delays in changes to clients' level of care. Also, MDHHS indicated staff oversight impacted the timeliness and accuracy of recoupments. Effect MDHHS paid a total of $342 from October 1, 2023 through September 30, 2024 for sampled clients who did not qualify for HHP services because they were hospitalized. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $223 - federal share of amounts paid for HHP services while sampled clients were hospitalized. • $119 - State share of costs MDHHS inappropriately used as matching.   Recommendation We recommend MDHHS prevent or timely recover payments for HHP services when clients no longer meet eligibility requirements. Management Views MDHHS agrees with the finding.

FINDING 2024-042 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible Home Help Assistance See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not obtain an updated medical needs form to ensure the HHP beneficiary met eligibility requirements for 1 of 3 HHP payments sampled. The specified time frame for needed services, as indicated on the beneficiary's initial medical needs form, elapsed before the date of the HHP payment and an updated medical needs form was not completed as of the date of our review. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under the HHP. MDHHS has developed the ASM to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 115 requires most HHP clients to obtain certification from a Medicaid-enrolled medical professional of the clients' medical need for services only at the initial opening of a case before qualifying for services unless special circumstances exist, such as the medical needs form has a specified time frame for needed services and the time frame has elapsed. Cause MDHHS informed us it did not consistently track and document when medical needs forms with a specified time frame were expected to expire. Effect MDHHS may have made payments on behalf of an ineligible HHP beneficiary. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $910 - federal share made to a provider on behalf of an ineligible beneficiary. • $492 - State share of costs MDHHS inappropriately used as matching. Recommendation We recommend MDHHS obtain an updated medical needs form to support beneficiary eligibility for HHP payments. Management Views MDHHS agrees with the finding.

FINDING 2024-012 Medicaid Cluster, ALN 93.775, 93.777, and 93.778 and Children's Health Insurance Program, ALN 93.767 - Beneficiary Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure or demonstrate compliance with federal laws and regulations relating to beneficiary eligibility for 7 (12%) of 60 Medicaid and 33 (55%) of 60 CHIP cases. Our review disclosed: a. MDHHS did not determine beneficiary eligibility in accordance with eligibility requirements for 2 (3%) of 60 Medicaid and 10 (17%) of 60 CHIP cases reviewed. b. MDHHS did not maintain case file documentation supporting the beneficiary eligibility determination; examples of documentation include MAGI-based income verification results, other income support, and signed applications for 4 (7%) of 60 Medicaid and 23 (38%) of 60 CHIP cases reviewed. c. MDHHS did not determine beneficiary eligibility within the required time frame for 1 (2%) of 60 Medicaid cases reviewed. Criteria Federal regulations 42 CFR 435.1002(b) and 42 CFR 457.622(d) indicate federal funding is available only for services provided to eligible beneficiaries. Federal regulations 42 CFR 435.914 and 42 CFR 457.965 require case record documentation be maintained to support the eligibility decision. Federal regulations 42 CFR 435.10, 42 CFR 457.50, and 42 CFR 457.70 require MDHHS to specify in its State Plan the groups to whom Medicaid and CHIP are provided and the conditions of eligibility for individuals in those groups. Federal regulation 42 CFR 435.912(c) requires MDHHS to determine eligibility and provide notice of the decision within 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. MDHHS Bridges Administrative Manual 300, The Case Record, indicates a case record includes documents and information related to a given case arranged in a series of packets and contained in a folder identified by a case name, grantee ID, or case number. A case record consists of both paper case records and electronic case files (ECF). The paper case record and ECF contain all forms, documents, and other evidence relevant to the group's current and past eligibility. Unless captured in Bridges the case record must document the facts essential to the eligibility determination and actions taken by the local office regarding the case. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required documentation in beneficiaries' case records to support eligibility determinations. Also, MDHHS's internal control did not ensure county/district office caseworkers timely reviewed beneficiaries' case records. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible beneficiaries and because of the 12% Medicaid and 55% CHIP error rates. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,697 - federal share. • $2,299 - State share of costs MDHHS inappropriately used as matching. Recommendations We recommend MDHHS properly consider Medicaid and CHIP eligibility documentation in accordance with eligibility requirements. We also recommend MDHHS maintain documentation to support beneficiary eligibility was determined in accordance with eligibility requirements. We further recommend MDHHS ensure eligibility determinations are made timely. Management Views MDHHS agrees with the identified exceptions for parts a. and c. of the finding. However, MDHHS disagrees that 3 Medicaid cases and 20 Children's Health Insurance Program (CHIP) cases with MAGI determinations cited in part b. did not have case file documentation supporting the beneficiary eligibility determination. The Centers for Medicare and Medicaid Services (CMS) has determined that a reasonable compatibility indicator can be used for CMS audit purposes to determine if the attested income information was electronically verified for MAGI cases and MDHHS disagrees that documentation was not maintained to support the eligibility determination. The SOM MiIntegrate system communicates with various State and federal electronic trusted data sources and sends the information from these sources, along with the beneficiaries' attested income, to the SOM MAGI Rules Engine where the MAGI eligibility determination is made. As part of the MAGI eligibility determination, a reasonable compatibility test is completed to determine if beneficiary/applicant attested income is within a specified percentage of the electronic trusted data sources or if the attested and verified income are below the threshold for the applicable program. The results of the MAGI eligibility determination are sent back to MiIntegrate using an Account Transfer (AT) packet that contains the results. MiIntegrate then communicates the results to the SOM MAGI Viewer and Bridges using an AT packet and Bridges stores the AT packet number only that can be used to view the details of the AT packet within the SOM MAGI Viewer. The version of the AT packet within the MAGI Viewer also contains a reasonable compatibility indicator that documents the outcome of the reasonable compatibility test and supports the SOM MAGI Rules Engine eligibility decision. MDHHS stores the AT packet information, including facts essential to the eligibility determination, within MiIntegrate and the MAGI Viewer instead of Bridges to help protect and secure the federal income tax data and unemployment data used for the determination. The AT packet for each individual determination can be retrieved from the MAGI Viewer using the AT packet number stored in each beneficiary's case file within Bridges. MDHHS is not aware of any federal regulations that preclude MDHHS from storing this information in a separate system to help secure the data and restrict access as required by federal and state law. Auditor's Comments to Management Views Regarding the MAGI beneficiary eligibility documentation cited in part b., the CMS's Payment Error Rate Measurement (PERM) Manual indicates if states use electronic verification to verify eligibility elements there should be an indicator in the eligibility system, i.e., Bridges, showing the State verified the element, including the result of the verification. Also, federal regulations 42 CFR 935.914 and 42 CFR 457.965 require MDHHS to maintain facts in the case file to support the eligibility determination. The AT packet number does not include the reasonable compatibility indicator. Therefore, it does not provide sufficient detail within the case file, defined by MDHHS as records captured in Bridges, to demonstrate MDHHS verified the income or the caseworker confirmed the result of the verification. Therefore, the finding stands as written.

FINDING 2024-040 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Payments on Behalf of Ineligible Beneficiaries See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure beneficiary eligibility was updated in CHAMPS. As a result, MDHHS issued $3,373 for 11 (37%) of 30 payments sampled from a $2,001,375 population of beneficiary payments with no corresponding Medicaid coverage. Criteria Federal regulation 42 CFR 435.1002(b) indicates federal funding is available only for services provided to eligible beneficiaries. Cause MDHHS informed us that because of system issues in Bridges, inaccurate eligibility information from Bridges was interfaced into CHAMPS, resulting in beneficiaries appearing eligible in CHAMPS in error and payments being processed based on that eligibility. Effect MDHHS made payments on behalf of ineligible beneficiaries. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs exceed $25,000. • $2,256 - federal share of payments made to providers on behalf of ineligible beneficiaries. • $1,117 - State share of payments made to providers on behalf of ineligible beneficiaries. Recommendation We recommend MDHHS ensure beneficiary eligibility is updated in CHAMPS. Management Views MDHHS agrees with the finding.

FINDING 2024-041 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible HHP Payments See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not prevent or timely recover payments, totaling $342, for 3 (20%) of 15 sampled clients who were hospitalized while receiving HHP services and no longer met eligibility requirements. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under HHP. MDHHS has developed the Adult Services Manual (ASM) to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 140 prohibits payment for HHP services on days a client is unavailable due to hospitalization, except the caregiver may receive payment of HHP services on the day a client is admitted to a hospital if HHP services were completed before the time the client was admitted to the hospital. Also, ASM Section 140 allows payment for HHP services on the day a client is discharged from the hospital. Cause MDHHS informed us the post-payment review process is complicated by the lag time (up to one year) associated with MDHHS receiving and processing hospital claims and delays in changes to clients' level of care. Also, MDHHS indicated staff oversight impacted the timeliness and accuracy of recoupments. Effect MDHHS paid a total of $342 from October 1, 2023 through September 30, 2024 for sampled clients who did not qualify for HHP services because they were hospitalized. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $223 - federal share of amounts paid for HHP services while sampled clients were hospitalized. • $119 - State share of costs MDHHS inappropriately used as matching.   Recommendation We recommend MDHHS prevent or timely recover payments for HHP services when clients no longer meet eligibility requirements. Management Views MDHHS agrees with the finding.

FINDING 2024-042 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible Home Help Assistance See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not obtain an updated medical needs form to ensure the HHP beneficiary met eligibility requirements for 1 of 3 HHP payments sampled. The specified time frame for needed services, as indicated on the beneficiary's initial medical needs form, elapsed before the date of the HHP payment and an updated medical needs form was not completed as of the date of our review. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under the HHP. MDHHS has developed the ASM to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 115 requires most HHP clients to obtain certification from a Medicaid-enrolled medical professional of the clients' medical need for services only at the initial opening of a case before qualifying for services unless special circumstances exist, such as the medical needs form has a specified time frame for needed services and the time frame has elapsed. Cause MDHHS informed us it did not consistently track and document when medical needs forms with a specified time frame were expected to expire. Effect MDHHS may have made payments on behalf of an ineligible HHP beneficiary. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $910 - federal share made to a provider on behalf of an ineligible beneficiary. • $492 - State share of costs MDHHS inappropriately used as matching. Recommendation We recommend MDHHS obtain an updated medical needs form to support beneficiary eligibility for HHP payments. Management Views MDHHS agrees with the finding.

FINDING 2024-012 Medicaid Cluster, ALN 93.775, 93.777, and 93.778 and Children's Health Insurance Program, ALN 93.767 - Beneficiary Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure or demonstrate compliance with federal laws and regulations relating to beneficiary eligibility for 7 (12%) of 60 Medicaid and 33 (55%) of 60 CHIP cases. Our review disclosed: a. MDHHS did not determine beneficiary eligibility in accordance with eligibility requirements for 2 (3%) of 60 Medicaid and 10 (17%) of 60 CHIP cases reviewed. b. MDHHS did not maintain case file documentation supporting the beneficiary eligibility determination; examples of documentation include MAGI-based income verification results, other income support, and signed applications for 4 (7%) of 60 Medicaid and 23 (38%) of 60 CHIP cases reviewed. c. MDHHS did not determine beneficiary eligibility within the required time frame for 1 (2%) of 60 Medicaid cases reviewed. Criteria Federal regulations 42 CFR 435.1002(b) and 42 CFR 457.622(d) indicate federal funding is available only for services provided to eligible beneficiaries. Federal regulations 42 CFR 435.914 and 42 CFR 457.965 require case record documentation be maintained to support the eligibility decision. Federal regulations 42 CFR 435.10, 42 CFR 457.50, and 42 CFR 457.70 require MDHHS to specify in its State Plan the groups to whom Medicaid and CHIP are provided and the conditions of eligibility for individuals in those groups. Federal regulation 42 CFR 435.912(c) requires MDHHS to determine eligibility and provide notice of the decision within 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. MDHHS Bridges Administrative Manual 300, The Case Record, indicates a case record includes documents and information related to a given case arranged in a series of packets and contained in a folder identified by a case name, grantee ID, or case number. A case record consists of both paper case records and electronic case files (ECF). The paper case record and ECF contain all forms, documents, and other evidence relevant to the group's current and past eligibility. Unless captured in Bridges the case record must document the facts essential to the eligibility determination and actions taken by the local office regarding the case. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required documentation in beneficiaries' case records to support eligibility determinations. Also, MDHHS's internal control did not ensure county/district office caseworkers timely reviewed beneficiaries' case records. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible beneficiaries and because of the 12% Medicaid and 55% CHIP error rates. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,697 - federal share. • $2,299 - State share of costs MDHHS inappropriately used as matching. Recommendations We recommend MDHHS properly consider Medicaid and CHIP eligibility documentation in accordance with eligibility requirements. We also recommend MDHHS maintain documentation to support beneficiary eligibility was determined in accordance with eligibility requirements. We further recommend MDHHS ensure eligibility determinations are made timely. Management Views MDHHS agrees with the identified exceptions for parts a. and c. of the finding. However, MDHHS disagrees that 3 Medicaid cases and 20 Children's Health Insurance Program (CHIP) cases with MAGI determinations cited in part b. did not have case file documentation supporting the beneficiary eligibility determination. The Centers for Medicare and Medicaid Services (CMS) has determined that a reasonable compatibility indicator can be used for CMS audit purposes to determine if the attested income information was electronically verified for MAGI cases and MDHHS disagrees that documentation was not maintained to support the eligibility determination. The SOM MiIntegrate system communicates with various State and federal electronic trusted data sources and sends the information from these sources, along with the beneficiaries' attested income, to the SOM MAGI Rules Engine where the MAGI eligibility determination is made. As part of the MAGI eligibility determination, a reasonable compatibility test is completed to determine if beneficiary/applicant attested income is within a specified percentage of the electronic trusted data sources or if the attested and verified income are below the threshold for the applicable program. The results of the MAGI eligibility determination are sent back to MiIntegrate using an Account Transfer (AT) packet that contains the results. MiIntegrate then communicates the results to the SOM MAGI Viewer and Bridges using an AT packet and Bridges stores the AT packet number only that can be used to view the details of the AT packet within the SOM MAGI Viewer. The version of the AT packet within the MAGI Viewer also contains a reasonable compatibility indicator that documents the outcome of the reasonable compatibility test and supports the SOM MAGI Rules Engine eligibility decision. MDHHS stores the AT packet information, including facts essential to the eligibility determination, within MiIntegrate and the MAGI Viewer instead of Bridges to help protect and secure the federal income tax data and unemployment data used for the determination. The AT packet for each individual determination can be retrieved from the MAGI Viewer using the AT packet number stored in each beneficiary's case file within Bridges. MDHHS is not aware of any federal regulations that preclude MDHHS from storing this information in a separate system to help secure the data and restrict access as required by federal and state law. Auditor's Comments to Management Views Regarding the MAGI beneficiary eligibility documentation cited in part b., the CMS's Payment Error Rate Measurement (PERM) Manual indicates if states use electronic verification to verify eligibility elements there should be an indicator in the eligibility system, i.e., Bridges, showing the State verified the element, including the result of the verification. Also, federal regulations 42 CFR 935.914 and 42 CFR 457.965 require MDHHS to maintain facts in the case file to support the eligibility determination. The AT packet number does not include the reasonable compatibility indicator. Therefore, it does not provide sufficient detail within the case file, defined by MDHHS as records captured in Bridges, to demonstrate MDHHS verified the income or the caseworker confirmed the result of the verification. Therefore, the finding stands as written.

FINDING 2024-040 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Payments on Behalf of Ineligible Beneficiaries See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure beneficiary eligibility was updated in CHAMPS. As a result, MDHHS issued $3,373 for 11 (37%) of 30 payments sampled from a $2,001,375 population of beneficiary payments with no corresponding Medicaid coverage. Criteria Federal regulation 42 CFR 435.1002(b) indicates federal funding is available only for services provided to eligible beneficiaries. Cause MDHHS informed us that because of system issues in Bridges, inaccurate eligibility information from Bridges was interfaced into CHAMPS, resulting in beneficiaries appearing eligible in CHAMPS in error and payments being processed based on that eligibility. Effect MDHHS made payments on behalf of ineligible beneficiaries. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs exceed $25,000. • $2,256 - federal share of payments made to providers on behalf of ineligible beneficiaries. • $1,117 - State share of payments made to providers on behalf of ineligible beneficiaries. Recommendation We recommend MDHHS ensure beneficiary eligibility is updated in CHAMPS. Management Views MDHHS agrees with the finding.

FINDING 2024-041 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible HHP Payments See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not prevent or timely recover payments, totaling $342, for 3 (20%) of 15 sampled clients who were hospitalized while receiving HHP services and no longer met eligibility requirements. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under HHP. MDHHS has developed the Adult Services Manual (ASM) to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 140 prohibits payment for HHP services on days a client is unavailable due to hospitalization, except the caregiver may receive payment of HHP services on the day a client is admitted to a hospital if HHP services were completed before the time the client was admitted to the hospital. Also, ASM Section 140 allows payment for HHP services on the day a client is discharged from the hospital. Cause MDHHS informed us the post-payment review process is complicated by the lag time (up to one year) associated with MDHHS receiving and processing hospital claims and delays in changes to clients' level of care. Also, MDHHS indicated staff oversight impacted the timeliness and accuracy of recoupments. Effect MDHHS paid a total of $342 from October 1, 2023 through September 30, 2024 for sampled clients who did not qualify for HHP services because they were hospitalized. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $223 - federal share of amounts paid for HHP services while sampled clients were hospitalized. • $119 - State share of costs MDHHS inappropriately used as matching.   Recommendation We recommend MDHHS prevent or timely recover payments for HHP services when clients no longer meet eligibility requirements. Management Views MDHHS agrees with the finding.

FINDING 2024-042 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible Home Help Assistance See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not obtain an updated medical needs form to ensure the HHP beneficiary met eligibility requirements for 1 of 3 HHP payments sampled. The specified time frame for needed services, as indicated on the beneficiary's initial medical needs form, elapsed before the date of the HHP payment and an updated medical needs form was not completed as of the date of our review. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under the HHP. MDHHS has developed the ASM to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 115 requires most HHP clients to obtain certification from a Medicaid-enrolled medical professional of the clients' medical need for services only at the initial opening of a case before qualifying for services unless special circumstances exist, such as the medical needs form has a specified time frame for needed services and the time frame has elapsed. Cause MDHHS informed us it did not consistently track and document when medical needs forms with a specified time frame were expected to expire. Effect MDHHS may have made payments on behalf of an ineligible HHP beneficiary. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $910 - federal share made to a provider on behalf of an ineligible beneficiary. • $492 - State share of costs MDHHS inappropriately used as matching. Recommendation We recommend MDHHS obtain an updated medical needs form to support beneficiary eligibility for HHP payments. Management Views MDHHS agrees with the finding.

FINDING 2024-012 Medicaid Cluster, ALN 93.775, 93.777, and 93.778 and Children's Health Insurance Program, ALN 93.767 - Beneficiary Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure or demonstrate compliance with federal laws and regulations relating to beneficiary eligibility for 7 (12%) of 60 Medicaid and 33 (55%) of 60 CHIP cases. Our review disclosed: a. MDHHS did not determine beneficiary eligibility in accordance with eligibility requirements for 2 (3%) of 60 Medicaid and 10 (17%) of 60 CHIP cases reviewed. b. MDHHS did not maintain case file documentation supporting the beneficiary eligibility determination; examples of documentation include MAGI-based income verification results, other income support, and signed applications for 4 (7%) of 60 Medicaid and 23 (38%) of 60 CHIP cases reviewed. c. MDHHS did not determine beneficiary eligibility within the required time frame for 1 (2%) of 60 Medicaid cases reviewed. Criteria Federal regulations 42 CFR 435.1002(b) and 42 CFR 457.622(d) indicate federal funding is available only for services provided to eligible beneficiaries. Federal regulations 42 CFR 435.914 and 42 CFR 457.965 require case record documentation be maintained to support the eligibility decision. Federal regulations 42 CFR 435.10, 42 CFR 457.50, and 42 CFR 457.70 require MDHHS to specify in its State Plan the groups to whom Medicaid and CHIP are provided and the conditions of eligibility for individuals in those groups. Federal regulation 42 CFR 435.912(c) requires MDHHS to determine eligibility and provide notice of the decision within 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. MDHHS Bridges Administrative Manual 300, The Case Record, indicates a case record includes documents and information related to a given case arranged in a series of packets and contained in a folder identified by a case name, grantee ID, or case number. A case record consists of both paper case records and electronic case files (ECF). The paper case record and ECF contain all forms, documents, and other evidence relevant to the group's current and past eligibility. Unless captured in Bridges the case record must document the facts essential to the eligibility determination and actions taken by the local office regarding the case. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required documentation in beneficiaries' case records to support eligibility determinations. Also, MDHHS's internal control did not ensure county/district office caseworkers timely reviewed beneficiaries' case records. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible beneficiaries and because of the 12% Medicaid and 55% CHIP error rates. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,697 - federal share. • $2,299 - State share of costs MDHHS inappropriately used as matching. Recommendations We recommend MDHHS properly consider Medicaid and CHIP eligibility documentation in accordance with eligibility requirements. We also recommend MDHHS maintain documentation to support beneficiary eligibility was determined in accordance with eligibility requirements. We further recommend MDHHS ensure eligibility determinations are made timely. Management Views MDHHS agrees with the identified exceptions for parts a. and c. of the finding. However, MDHHS disagrees that 3 Medicaid cases and 20 Children's Health Insurance Program (CHIP) cases with MAGI determinations cited in part b. did not have case file documentation supporting the beneficiary eligibility determination. The Centers for Medicare and Medicaid Services (CMS) has determined that a reasonable compatibility indicator can be used for CMS audit purposes to determine if the attested income information was electronically verified for MAGI cases and MDHHS disagrees that documentation was not maintained to support the eligibility determination. The SOM MiIntegrate system communicates with various State and federal electronic trusted data sources and sends the information from these sources, along with the beneficiaries' attested income, to the SOM MAGI Rules Engine where the MAGI eligibility determination is made. As part of the MAGI eligibility determination, a reasonable compatibility test is completed to determine if beneficiary/applicant attested income is within a specified percentage of the electronic trusted data sources or if the attested and verified income are below the threshold for the applicable program. The results of the MAGI eligibility determination are sent back to MiIntegrate using an Account Transfer (AT) packet that contains the results. MiIntegrate then communicates the results to the SOM MAGI Viewer and Bridges using an AT packet and Bridges stores the AT packet number only that can be used to view the details of the AT packet within the SOM MAGI Viewer. The version of the AT packet within the MAGI Viewer also contains a reasonable compatibility indicator that documents the outcome of the reasonable compatibility test and supports the SOM MAGI Rules Engine eligibility decision. MDHHS stores the AT packet information, including facts essential to the eligibility determination, within MiIntegrate and the MAGI Viewer instead of Bridges to help protect and secure the federal income tax data and unemployment data used for the determination. The AT packet for each individual determination can be retrieved from the MAGI Viewer using the AT packet number stored in each beneficiary's case file within Bridges. MDHHS is not aware of any federal regulations that preclude MDHHS from storing this information in a separate system to help secure the data and restrict access as required by federal and state law. Auditor's Comments to Management Views Regarding the MAGI beneficiary eligibility documentation cited in part b., the CMS's Payment Error Rate Measurement (PERM) Manual indicates if states use electronic verification to verify eligibility elements there should be an indicator in the eligibility system, i.e., Bridges, showing the State verified the element, including the result of the verification. Also, federal regulations 42 CFR 935.914 and 42 CFR 457.965 require MDHHS to maintain facts in the case file to support the eligibility determination. The AT packet number does not include the reasonable compatibility indicator. Therefore, it does not provide sufficient detail within the case file, defined by MDHHS as records captured in Bridges, to demonstrate MDHHS verified the income or the caseworker confirmed the result of the verification. Therefore, the finding stands as written.

FINDING 2024-040 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Payments on Behalf of Ineligible Beneficiaries See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure beneficiary eligibility was updated in CHAMPS. As a result, MDHHS issued $3,373 for 11 (37%) of 30 payments sampled from a $2,001,375 population of beneficiary payments with no corresponding Medicaid coverage. Criteria Federal regulation 42 CFR 435.1002(b) indicates federal funding is available only for services provided to eligible beneficiaries. Cause MDHHS informed us that because of system issues in Bridges, inaccurate eligibility information from Bridges was interfaced into CHAMPS, resulting in beneficiaries appearing eligible in CHAMPS in error and payments being processed based on that eligibility. Effect MDHHS made payments on behalf of ineligible beneficiaries. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs exceed $25,000. • $2,256 - federal share of payments made to providers on behalf of ineligible beneficiaries. • $1,117 - State share of payments made to providers on behalf of ineligible beneficiaries. Recommendation We recommend MDHHS ensure beneficiary eligibility is updated in CHAMPS. Management Views MDHHS agrees with the finding.

FINDING 2024-041 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible HHP Payments See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not prevent or timely recover payments, totaling $342, for 3 (20%) of 15 sampled clients who were hospitalized while receiving HHP services and no longer met eligibility requirements. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under HHP. MDHHS has developed the Adult Services Manual (ASM) to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 140 prohibits payment for HHP services on days a client is unavailable due to hospitalization, except the caregiver may receive payment of HHP services on the day a client is admitted to a hospital if HHP services were completed before the time the client was admitted to the hospital. Also, ASM Section 140 allows payment for HHP services on the day a client is discharged from the hospital. Cause MDHHS informed us the post-payment review process is complicated by the lag time (up to one year) associated with MDHHS receiving and processing hospital claims and delays in changes to clients' level of care. Also, MDHHS indicated staff oversight impacted the timeliness and accuracy of recoupments. Effect MDHHS paid a total of $342 from October 1, 2023 through September 30, 2024 for sampled clients who did not qualify for HHP services because they were hospitalized. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $223 - federal share of amounts paid for HHP services while sampled clients were hospitalized. • $119 - State share of costs MDHHS inappropriately used as matching.   Recommendation We recommend MDHHS prevent or timely recover payments for HHP services when clients no longer meet eligibility requirements. Management Views MDHHS agrees with the finding.

FINDING 2024-042 Medicaid Cluster, ALN 93.775, 93.777, and 93.778, Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking - Ineligible Home Help Assistance See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not obtain an updated medical needs form to ensure the HHP beneficiary met eligibility requirements for 1 of 3 HHP payments sampled. The specified time frame for needed services, as indicated on the beneficiary's initial medical needs form, elapsed before the date of the HHP payment and an updated medical needs form was not completed as of the date of our review. Criteria Federal regulation 42 CFR 435.10 requires MDHHS to specify in its State Plan the groups to whom Medicaid is provided and the conditions of eligibility for individuals in those groups. MDHHS's Medicaid State Plan states it will provide personal care services under the HHP. MDHHS has developed the ASM to further define specific policies and procedures for delivery of Medicaid HHP services. ASM Section 115 requires most HHP clients to obtain certification from a Medicaid-enrolled medical professional of the clients' medical need for services only at the initial opening of a case before qualifying for services unless special circumstances exist, such as the medical needs form has a specified time frame for needed services and the time frame has elapsed. Cause MDHHS informed us it did not consistently track and document when medical needs forms with a specified time frame were expected to expire. Effect MDHHS may have made payments on behalf of an ineligible HHP beneficiary. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $910 - federal share made to a provider on behalf of an ineligible beneficiary. • $492 - State share of costs MDHHS inappropriately used as matching. Recommendation We recommend MDHHS obtain an updated medical needs form to support beneficiary eligibility for HHP payments. Management Views MDHHS agrees with the finding.

FINDING 2024-045 Temporary Assistance for Needy Families, ALN 93.558, Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility - Non-Financial Eligibility Documentation See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not obtain or maintain sufficient non-financial case record documentation to support client eligibility for 1 (5%) of 22 sampled TANF-funded assistance payments. In this 1 instance, we noted MDHHS did not ensure the family's case record contained documentation to indicate household individuals were not in violation of their probation or parole requirements related to any offense in order to demonstrate the family was in need of TANF assistance. Criteria Federal regulation 45 CFR 260.20 requires a family be needy in order to be eligible for TANF assistance and job preparation services. Federal regulation 45 CFR 205.60(a) requires MDHHS to maintain records to support eligibility, including facts to support the client's need for assistance. MDHHS's policies and procedures require documentation used to verify eligibility be maintained in the case file. In addition, Subpart E of federal regulation 45 CFR 75 requires costs charged to federal programs be adequately documented, be necessary and reasonable for the administration of the federal award, be in accordance with the relative benefits received by the program, and be consistent with policies and procedures applying to both the federal award and other activities of the state. Cause MDHHS informed us its controls were not sufficient to ensure all of the required verification documentation was appropriately maintained in the client's case record. Effect MDHHS may have made TANF-funded assistance payments to ineligible clients. The federal grantor agency could issue sanctions or disallowances related to noncompliance.   Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $13 - federally funded. Recommendation We recommend MDHHS obtain and maintain sufficient non-financial case record documentation to support client eligibility for TANF-funded assistance payments. Management Views MDHHS agrees with the finding.

FINDING 2024-046 Temporary Assistance for Needy Families, ALN 93.558, Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility - Inappropriate TANF-Funded Emergency Foster Care Assistance See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not appropriately consider a child's circumstances to ensure the child met eligibility requirements for 1 (17%) of 6 sampled TANF-funded emergency foster care case records. Our review disclosed because the child met Foster Care Title IV-E program requirements, the child did not meet TANF eligibility requirements. Criteria MDHHS's TANF State Plan allows MDHHS to use TANF funds for emergency foster care only if such care cannot be provided under Title IV-E. Administration for Children and Families' TANF Program Policy Questions and Answers indicate states may not use federal TANF or State maintenance of effort funds to take the place of any foster care maintenance payments provided under the federal foster care program. In addition, Subpart E of federal regulation 45 CFR 75 requires costs charged to federal programs be necessary and reasonable for the administration of the federal award, be in accordance with the relative benefits received by the program, and be consistent with policies and procedures applying to both the federal award and other activities of the state.   Cause MDHHS informed us the child welfare funding specialist did not timely update the funding determination because they were not aware the case manager uploaded the child's birth certificate. Effect MDHHS may have made emergency foster care payments on behalf of a child who did not qualify for TANF federal reimbursement. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,430 - federally funded. Recommendation We recommend MDHHS appropriately consider a child's circumstances to ensure the child meets TANF eligibility requirements. Management Views MDHHS agrees with the finding.

FINDING 2024-050 Refugee and Entrant Assistance State/Replacement Designee Administered Programs, ALN 93.566, Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility - Assistance to Ineligible Refugees See Schedule of Findings and Questioned Costs for chart/table. Condition LEO and MDHHS did not ensure compliance with federal laws and regulations relating to client eligibility. Our review disclosed MDHHS did not maintain sufficient documentation of its efforts to evaluate clientsʹ eligibility; examples of documentation include support for the verification of nationality, identification, U.S. entry date, and mandatory work for 22 (55%) of 40 sampled refugee cash assistance payments. Criteria Federal regulations 45 CFR 400.53 and 45 CFR 400.75(a) require refugees to meet general eligibility requirements for refugee cash assistance, including requirements that eligible refugees meet immigration status and identification conditions; reside in the United States less than the eligibility period determined by HHS's Office of Refugee Resettlement; and cannot, without good cause, fail or refuse to meet the work registry requirements. Also, federal regulation 45 CFR 400.28 requires MDHHS provide for the maintenance of operational records as are necessary for federal monitoring of the State's REAP. Federal regulation 45 CFR 75.303 requires the auditee to establish and maintain effective internal control over federal awards that provides reasonable assurance the auditee is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of federal awards. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required verification documentation in clientsʹ case records to support eligibility. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have provided assistance to ineligible clients and because of the overall high error rate. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $892 - federal share. Recommendation We recommend LEO and MDHHS maintain documentation to support client eligibility was determined in accordance with eligibility requirements. Management Views LEO and MDHHS agree with the finding.

FINDING 2024-055 Low-Income Home Energy Assistance, ALN 93.568, Eligibility - Eligibility Determinations See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not maintain sufficient documentation of its efforts to evaluate client eligibility; examples of documentation include support for the verification of the client's income, client contribution payment, and proof of energy crisis for 11 (26%) of 42 sampled LIHEAP-funded State Emergency Relief (SER) energy payments. Criteria Federal law 42 USC 8624 requires the State to expend funds in accordance with the LIHEAP State Plan and allows MDHHS to use LIHEAP funds to intervene in energy-related crisis situations and assist eligible households to meet the costs of home energy. MDHHS policy requires county/district office caseworkers to verify and include certain income of SER group members during intake in order to determine eligibility for SER energy services. Also, policy, effective through November 30, 2023, states the payment amount must match the amount on the past due or shut-off notice. MDHHS revised its policy, effective November 13, 2023, to indicate the payment should be processed using the most advantageous amount to benefit the client up to the service cap. In addition, policy indicates the client contribution payment or payment by another agency must be verified before authorizing the department's portion of the remaining cost of services. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure county/district office specialists adhered to established policies and procedures. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible recipients and because of the high error rate. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $4,397- federal share. Recommendation We recommend MDHHS maintain sufficient documentation to support client eligibility for LIHEAP-funded SER energy payments. Management Views MDHHS agrees with the finding.

FINDING 2024-012 Medicaid Cluster, ALN 93.775, 93.777, and 93.778 and Children's Health Insurance Program, ALN 93.767 - Beneficiary Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure or demonstrate compliance with federal laws and regulations relating to beneficiary eligibility for 7 (12%) of 60 Medicaid and 33 (55%) of 60 CHIP cases. Our review disclosed: a. MDHHS did not determine beneficiary eligibility in accordance with eligibility requirements for 2 (3%) of 60 Medicaid and 10 (17%) of 60 CHIP cases reviewed. b. MDHHS did not maintain case file documentation supporting the beneficiary eligibility determination; examples of documentation include MAGI-based income verification results, other income support, and signed applications for 4 (7%) of 60 Medicaid and 23 (38%) of 60 CHIP cases reviewed. c. MDHHS did not determine beneficiary eligibility within the required time frame for 1 (2%) of 60 Medicaid cases reviewed. Criteria Federal regulations 42 CFR 435.1002(b) and 42 CFR 457.622(d) indicate federal funding is available only for services provided to eligible beneficiaries. Federal regulations 42 CFR 435.914 and 42 CFR 457.965 require case record documentation be maintained to support the eligibility decision. Federal regulations 42 CFR 435.10, 42 CFR 457.50, and 42 CFR 457.70 require MDHHS to specify in its State Plan the groups to whom Medicaid and CHIP are provided and the conditions of eligibility for individuals in those groups. Federal regulation 42 CFR 435.912(c) requires MDHHS to determine eligibility and provide notice of the decision within 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. MDHHS Bridges Administrative Manual 300, The Case Record, indicates a case record includes documents and information related to a given case arranged in a series of packets and contained in a folder identified by a case name, grantee ID, or case number. A case record consists of both paper case records and electronic case files (ECF). The paper case record and ECF contain all forms, documents, and other evidence relevant to the group's current and past eligibility. Unless captured in Bridges the case record must document the facts essential to the eligibility determination and actions taken by the local office regarding the case. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required documentation in beneficiaries' case records to support eligibility determinations. Also, MDHHS's internal control did not ensure county/district office caseworkers timely reviewed beneficiaries' case records. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible beneficiaries and because of the 12% Medicaid and 55% CHIP error rates. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,697 - federal share. • $2,299 - State share of costs MDHHS inappropriately used as matching. Recommendations We recommend MDHHS properly consider Medicaid and CHIP eligibility documentation in accordance with eligibility requirements. We also recommend MDHHS maintain documentation to support beneficiary eligibility was determined in accordance with eligibility requirements. We further recommend MDHHS ensure eligibility determinations are made timely. Management Views MDHHS agrees with the identified exceptions for parts a. and c. of the finding. However, MDHHS disagrees that 3 Medicaid cases and 20 Children's Health Insurance Program (CHIP) cases with MAGI determinations cited in part b. did not have case file documentation supporting the beneficiary eligibility determination. The Centers for Medicare and Medicaid Services (CMS) has determined that a reasonable compatibility indicator can be used for CMS audit purposes to determine if the attested income information was electronically verified for MAGI cases and MDHHS disagrees that documentation was not maintained to support the eligibility determination. The SOM MiIntegrate system communicates with various State and federal electronic trusted data sources and sends the information from these sources, along with the beneficiaries' attested income, to the SOM MAGI Rules Engine where the MAGI eligibility determination is made. As part of the MAGI eligibility determination, a reasonable compatibility test is completed to determine if beneficiary/applicant attested income is within a specified percentage of the electronic trusted data sources or if the attested and verified income are below the threshold for the applicable program. The results of the MAGI eligibility determination are sent back to MiIntegrate using an Account Transfer (AT) packet that contains the results. MiIntegrate then communicates the results to the SOM MAGI Viewer and Bridges using an AT packet and Bridges stores the AT packet number only that can be used to view the details of the AT packet within the SOM MAGI Viewer. The version of the AT packet within the MAGI Viewer also contains a reasonable compatibility indicator that documents the outcome of the reasonable compatibility test and supports the SOM MAGI Rules Engine eligibility decision. MDHHS stores the AT packet information, including facts essential to the eligibility determination, within MiIntegrate and the MAGI Viewer instead of Bridges to help protect and secure the federal income tax data and unemployment data used for the determination. The AT packet for each individual determination can be retrieved from the MAGI Viewer using the AT packet number stored in each beneficiary's case file within Bridges. MDHHS is not aware of any federal regulations that preclude MDHHS from storing this information in a separate system to help secure the data and restrict access as required by federal and state law. Auditor's Comments to Management Views Regarding the MAGI beneficiary eligibility documentation cited in part b., the CMS's Payment Error Rate Measurement (PERM) Manual indicates if states use electronic verification to verify eligibility elements there should be an indicator in the eligibility system, i.e., Bridges, showing the State verified the element, including the result of the verification. Also, federal regulations 42 CFR 935.914 and 42 CFR 457.965 require MDHHS to maintain facts in the case file to support the eligibility determination. The AT packet number does not include the reasonable compatibility indicator. Therefore, it does not provide sufficient detail within the case file, defined by MDHHS as records captured in Bridges, to demonstrate MDHHS verified the income or the caseworker confirmed the result of the verification. Therefore, the finding stands as written.

FINDING 2024-012 Medicaid Cluster, ALN 93.775, 93.777, and 93.778 and Children's Health Insurance Program, ALN 93.767 - Beneficiary Eligibility See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure or demonstrate compliance with federal laws and regulations relating to beneficiary eligibility for 7 (12%) of 60 Medicaid and 33 (55%) of 60 CHIP cases. Our review disclosed: a. MDHHS did not determine beneficiary eligibility in accordance with eligibility requirements for 2 (3%) of 60 Medicaid and 10 (17%) of 60 CHIP cases reviewed. b. MDHHS did not maintain case file documentation supporting the beneficiary eligibility determination; examples of documentation include MAGI-based income verification results, other income support, and signed applications for 4 (7%) of 60 Medicaid and 23 (38%) of 60 CHIP cases reviewed. c. MDHHS did not determine beneficiary eligibility within the required time frame for 1 (2%) of 60 Medicaid cases reviewed. Criteria Federal regulations 42 CFR 435.1002(b) and 42 CFR 457.622(d) indicate federal funding is available only for services provided to eligible beneficiaries. Federal regulations 42 CFR 435.914 and 42 CFR 457.965 require case record documentation be maintained to support the eligibility decision. Federal regulations 42 CFR 435.10, 42 CFR 457.50, and 42 CFR 457.70 require MDHHS to specify in its State Plan the groups to whom Medicaid and CHIP are provided and the conditions of eligibility for individuals in those groups. Federal regulation 42 CFR 435.912(c) requires MDHHS to determine eligibility and provide notice of the decision within 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. MDHHS Bridges Administrative Manual 300, The Case Record, indicates a case record includes documents and information related to a given case arranged in a series of packets and contained in a folder identified by a case name, grantee ID, or case number. A case record consists of both paper case records and electronic case files (ECF). The paper case record and ECF contain all forms, documents, and other evidence relevant to the group's current and past eligibility. Unless captured in Bridges the case record must document the facts essential to the eligibility determination and actions taken by the local office regarding the case. Cause MDHHS's internal control and monitoring activities were not sufficient to ensure MDHHS maintained or appropriately considered the required documentation in beneficiaries' case records to support eligibility determinations. Also, MDHHS's internal control did not ensure county/district office caseworkers timely reviewed beneficiaries' case records. Effect We consider this to be a material weakness and material noncompliance because MDHHS may have made payments on behalf of ineligible beneficiaries and because of the 12% Medicaid and 55% CHIP error rates. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Federal regulation 2 CFR 200.516(a)(3) requires the auditor to report known questioned costs less than $25,000 if it is likely total questioned costs would exceed $25,000. • $6,697 - federal share. • $2,299 - State share of costs MDHHS inappropriately used as matching. Recommendations We recommend MDHHS properly consider Medicaid and CHIP eligibility documentation in accordance with eligibility requirements. We also recommend MDHHS maintain documentation to support beneficiary eligibility was determined in accordance with eligibility requirements. We further recommend MDHHS ensure eligibility determinations are made timely. Management Views MDHHS agrees with the identified exceptions for parts a. and c. of the finding. However, MDHHS disagrees that 3 Medicaid cases and 20 Children's Health Insurance Program (CHIP) cases with MAGI determinations cited in part b. did not have case file documentation supporting the beneficiary eligibility determination. The Centers for Medicare and Medicaid Services (CMS) has determined that a reasonable compatibility indicator can be used for CMS audit purposes to determine if the attested income information was electronically verified for MAGI cases and MDHHS disagrees that documentation was not maintained to support the eligibility determination. The SOM MiIntegrate system communicates with various State and federal electronic trusted data sources and sends the information from these sources, along with the beneficiaries' attested income, to the SOM MAGI Rules Engine where the MAGI eligibility determination is made. As part of the MAGI eligibility determination, a reasonable compatibility test is completed to determine if beneficiary/applicant attested income is within a specified percentage of the electronic trusted data sources or if the attested and verified income are below the threshold for the applicable program. The results of the MAGI eligibility determination are sent back to MiIntegrate using an Account Transfer (AT) packet that contains the results. MiIntegrate then communicates the results to the SOM MAGI Viewer and Bridges using an AT packet and Bridges stores the AT packet number only that can be used to view the details of the AT packet within the SOM MAGI Viewer. The version of the AT packet within the MAGI Viewer also contains a reasonable compatibility indicator that documents the outcome of the reasonable compatibility test and supports the SOM MAGI Rules Engine eligibility decision. MDHHS stores the AT packet information, including facts essential to the eligibility determination, within MiIntegrate and the MAGI Viewer instead of Bridges to help protect and secure the federal income tax data and unemployment data used for the determination. The AT packet for each individual determination can be retrieved from the MAGI Viewer using the AT packet number stored in each beneficiary's case file within Bridges. MDHHS is not aware of any federal regulations that preclude MDHHS from storing this information in a separate system to help secure the data and restrict access as required by federal and state law. Auditor's Comments to Management Views Regarding the MAGI beneficiary eligibility documentation cited in part b., the CMS's Payment Error Rate Measurement (PERM) Manual indicates if states use electronic verification to verify eligibility elements there should be an indicator in the eligibility system, i.e., Bridges, showing the State verified the element, including the result of the verification. Also, federal regulations 42 CFR 935.914 and 42 CFR 457.965 require MDHHS to maintain facts in the case file to support the eligibility determination. The AT packet number does not include the reasonable compatibility indicator. Therefore, it does not provide sufficient detail within the case file, defined by MDHHS as records captured in Bridges, to demonstrate MDHHS verified the income or the caseworker confirmed the result of the verification. Therefore, the finding stands as written.

Criteria: Per Title 2 CFR § 200.516, the auditor must report known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: As part of a review performed by METRO’s internal audit department (METRO IA) over the activities of the vanpool department in fiscal year 2024, METRO IA identified certain questioned costs incurred and reimbursed as part of the Highway Planning and Construction program administered by the Texas Department of Transportation (TXDOT). These questioned costs were communicated by METRO management to TXDOT and they are working with TXDOT on final resolution. The Highway Planning and Construction program was not a major program in fiscal year 2024 subject to a single audit. We did not identify any other similar costs in the major programs tested. Total questioned cost identified through the METRO IA procedures was $262,794. Total expenditures for the Highway Planning and Construction program were $744,358. Cause: The Vanpool department did not have adequate internal controls and processes in place to ensure that department personnel properly understood grant requirements and that program costs were properly calculated and allowable in accordance with the grant agreements. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide personnel in the determination of allowable costs in accordance with grant agreements. In particular, management should focus on the processes and controls associated with the vanpool department.

Capital Fund Program Grants Draws Condition: During our audit procedures over revenue recognition for the Capital Fund Program (CFP), we identified drawdowns of federal funds for which the client was unable to provide adequate supporting documentation. Specifically, the expenditures associated with the draw requests lacked invoices, contracts, or other substantiating records to demonstrate that the costs were allowable, allocable, and incurred in accordance with applicable federal requirements. Criteria: Per 2 CFR §200.403 and §200.302, costs charged to federal awards must be adequately documented and supported by source documentation. Additionally, 2 CFR §200.516(a)(3) requires auditors to report known questioned costs exceeding $25,000 for any federal program, even if not selected as a major program. Cause: The deficiency appears to result from inadequate internal controls over documentation retention and grant compliance monitoring for the CFP. Effect: The lack of documentation impairs the auditor’s ability to verify the allowability of expenditures, resulting in known questioned costs exceeding $25,000. Questioned Cost: $90,149 Recommendations: We recommend that management implement procedures to ensure that all draw requests under the CFP are supported by complete and accurate documentation. This includes maintaining invoices, contracts, and payment records that clearly link expenditures to the approved scope of work under the grant. Management Response: Today’s Marlboro County Housing Authority management acknowledges the auditor’s finding that documentation to support certain CFP drawdowns was incomplete or missing and concurs that this represents a failure to comply with Uniform Guidance documentation requirements under 2 CFR §200.302 and §200.403. The Authority recognizes the importance of maintaining complete and accurate supporting records—such as invoices, contracts, and payment documentation—to substantiate costs charged to federal programs and ensure allowability and allocability under the Capital Fund Program. Effective October 1st, 2024, all draw requests under the Capital Fund Program ARE supported by: Approved contracts or purchase orders  Invoices or other source documents  Proof of payment (e.g., canceled checks, ACH confirmations)  Documentation clearly linking each expense to an approved activity in the CFP Annual Statement

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.

Criteria: As a condition of receiving federal awards, the awardee organization must comply with filing the required reports timely, specifically, submission of an audit report within nine months after the end of the audit period. Condition: The entity submitted their audit report eleven months after the end of their audit period September 30, 2023. Cause: The entity has not been able to close their books in a timely manner due to the late submission of vendor invoices. At times their closing has conflicted with the auditor’s availability and therefore, the audit was unable to be completed within the nine month period. Effect: The entity was not in compliance with the deadline for the audit report under 2 CFR 200.516 (a). Questioned costs: None Reported Context/Sampling: None Reported Repeat Finding from Prior Year: Yes 2023-001 Recommendation: We recommend that management communicate with their vendors to assure that timely invoices are submitted and that a strict timeline for completion of the audit is adhered to. Views of Responsible Officials: The entity has implemented wording in their vendor contracts that they will not honor invoices that are more than 90 days out.