FINDING 2022-206The Department did not complete required subrecipient monitoring of the Elementary and Secondary School Emergency Relief (ESSER) Fund of the Education Stabilization Fund.Type of Finding: Material Noncompliance, Material WeaknessAssistance Listing Title: Elementary and Secondary School Emergency Relief Fund; Emergency Assistance for Non-Public Schools; ARPA ESSER III; ARPA ESSER - Homeless Children and YouthAssistance Listing Number: 84.425D; 84.425R; 84.425U; 84.425WFederal Award Number: S425D210043; S425D200043; S425R210024; S425U210043; S425W210013Program Year: January 5, 2021 ? September 30, 2023; May 18, 2020 ? September 30, 2022; February 11, 2021 ? September 30, 2023; March 24, 2021 ? September 30, 2024; April 23, 2021 ? September 30, 2024Federal Agency: Department of EducationCompliance Requirement: Subrecipient MonitoringQuestioned Costs: NoneCriteria: The U.S. Code of Federal Regulations (CFR) 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, superseding the Office of Management and Budget (OMB) Circular A-102, Grants and Cooperative Agreements with State and Local Governments, describes the pass-through entity?s responsibility for administering necessary requirements on subrecipients so that the federal award is used in accordance with federal regulations.Specifically, 2 CFR 200.332(d) and 2 CFR 25.200 identify the requirements for the Department as the pass- through entity in providing subawards. This includes communication of certain information, such as the subrecipient?s unique entity identifier and required registration in the System for Award Management (SAM). In addition, the Department must evaluate each subrecipient?s risk of noncompliance with federal statutes and the terms and conditions of the subaward when determining the extent of subrecipient monitoring to be completed to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that the subaward performance goals are achieved. In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, monitoring must include a review of financial and performance reports required by the pass-through entity, follow up on any deficiencies identified in the subrecipient that are detected through audits, on-site reviews and other means, and issuing a management decision for audit findings, as required by 2 CFR 200.521.Finally, 2 CFR 200.303 requires the Department to establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.Condition: The Department initially received ESSER funding in fiscal year 2021 and integrated ESSER monitoring with the general subrecipient monitoring used for other federal programs. The Department?s 2020- 2021 Monitoring Tool included only one indicator related to the ESSER program and did not adequately address all subrecipient monitoring requirements. However, in fiscal year 2021, the Department determined that the existing monitoring procedures were not robust enough for the additional requirements associated with ESSER subrecipient monitoring and discontinued those procedures without implementing any alternative procedures during fiscal year 2022.This was a finding included in the Single Audit Report for the year ended June 30, 2021, and the Department provided a corrective action plan to monitor subrecipients. However, the Department did not implement the plan until after the audit period, in fiscal year 2023.Cause: The Department realized the current procedures were not sufficient to meet the monitoring requirements of ESSER and indicated a monitoring process specific to the ESSER program compliance requirements was being developed; however, it was not developed in a timely manner to comply with federal requirements.Effect: The Department is not in compliance with subrecipient monitoring requirements. Without adequate monitoring of subrecipients, the Department is exposed to an increased risk of making improper payments for unallowable or unsupported costs.Recommendation: We recommend that the Department implement procedures to ensure compliance with all requirements as a pass-through entity. We also recommend that the Department design and implement effective control procedures to ensure subrecipient monitoring activities are complete and appropriate.Management?s View: The Department agrees with this finding.Corrective Action: It was not until the end of the 2022 legislative session that spending authority was given to the State Department of Education to use ARP ESSER administrative funds to hire additional staff to meet the robust requirements identified by the U.S. Department of Education. Up to that point, only one full-time person was handling all of the needs associated with ESSER funds. Since then, two positions have been hired. The ESSER Data and Reporting Coordinator began in April 2022, and the ESSER Monitoring Coordinator began in June 2022. While developing the monitoring procedures began in July 2022, it was after the audit timeframe. The Department now has in place all ESSER monitoring policies and procedures and will complete year one monitoring before May 5, 2023.Auditor?s Concluding Remarks: We thank the Department for its cooperation and assistance throughout the audit.
2022-007 - Noncompliance with Subrecipient Monitoring RequirementsAward Years: 2018, 2020 - 2022Award Numbers: DUE-2044358, NA18OAR4170098, OIA-2019511, OIA-2119688Compliance Requirement: Subrecipient MonitoringRepeat Finding: Yes (Prior Year Finding No. 2021-010)See Schedule of Findings and Questioned Costs for chart/tableCondition:For the second consecutive year, UL Lafayette did not adequately monitor subrecipients of the R&D Cluster programs. In a non-statistical sample of five subawards out of a population of 49 subawards, it was noted that for four (80%) of the subrecipients evaluated UL Lafayette was unable to provide documentation that ensured each subrecipient obtained the required audit or that the audit was reviewed so that timely and appropriate action could be taken for any findings pertaining to the federal awards. Additionally, for all five (100%) of the subrecipients evaluated, UL Lafayette could not provide evidence that the required risk analyses were performed to evaluate each subrecipients? risk of noncompliance with federal regulations and the terms of the subaward.Criteria:2 CFR 200.332(b) requires pass-through entities to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.Per 2 CFR 200.332(f), pass-through entities are responsible for verifying that every subrecipient is audited as required by 2 CFR Part 200, subpart F when it is expected that the subrecipient's federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in CFR 200.501 of $750,000 or more in federal awards during the subrecipient?s fiscal year.2 CFR 200.332(d)(2) requires that pass-through entities follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies provided to the subrecipient from the pass-through entities detected through audits, on-site reviews, and written confirmation from the subrecipient.2 CFR 200.332(d)(2) and (3) require pass-through entities to issue a management decision on applicable audit findings in accordance with 2 CFR 200.521, within six months after acceptance of the subrecipient?s audit report by the Federal Audit Clearinghouse, and ensure that the subrecipient takes timely and appropriate corrective action on all findings.Cause:UL Lafayette management indicated that it was working on internal procedures to adequately monitor subrecipients as result of the prior-year finding. However, management has yet to finalize and apply these procedures on all active subrecipients.Effect:Failure to properly monitor subrecipients results in noncompliance with federal regulations and increases the likelihood of improper payments which may have to be returned to the federal awarding agency.Recommendation:UL Lafayette should strengthen controls to ensure the timely review of all required subrecipient audit reports in order to evaluate the impact of any findings noted in the audits and issue management decision letters, if applicable. In addition, UL Lafayette should strengthen controls to ensure risk assessments are performed and documented on all subrecipients in accordance with federal regulations.Management?s Response and Corrective Action Plan:Management did not concur with the finding, noting it did not have sufficient time in fiscal year 2022 for corrective action and provided its progress on addressing the finding (B-83).
2022-007 - Noncompliance with Subrecipient Monitoring RequirementsAward Years: 2018, 2020 - 2022Award Numbers: DUE-2044358, NA18OAR4170098, OIA-2019511, OIA-2119688Compliance Requirement: Subrecipient MonitoringRepeat Finding: Yes (Prior Year Finding No. 2021-010)See Schedule of Findings and Questioned Costs for chart/tableCondition:For the second consecutive year, UL Lafayette did not adequately monitor subrecipients of the R&D Cluster programs. In a non-statistical sample of five subawards out of a population of 49 subawards, it was noted that for four (80%) of the subrecipients evaluated UL Lafayette was unable to provide documentation that ensured each subrecipient obtained the required audit or that the audit was reviewed so that timely and appropriate action could be taken for any findings pertaining to the federal awards. Additionally, for all five (100%) of the subrecipients evaluated, UL Lafayette could not provide evidence that the required risk analyses were performed to evaluate each subrecipients? risk of noncompliance with federal regulations and the terms of the subaward.Criteria:2 CFR 200.332(b) requires pass-through entities to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.Per 2 CFR 200.332(f), pass-through entities are responsible for verifying that every subrecipient is audited as required by 2 CFR Part 200, subpart F when it is expected that the subrecipient's federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in CFR 200.501 of $750,000 or more in federal awards during the subrecipient?s fiscal year.2 CFR 200.332(d)(2) requires that pass-through entities follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies provided to the subrecipient from the pass-through entities detected through audits, on-site reviews, and written confirmation from the subrecipient.2 CFR 200.332(d)(2) and (3) require pass-through entities to issue a management decision on applicable audit findings in accordance with 2 CFR 200.521, within six months after acceptance of the subrecipient?s audit report by the Federal Audit Clearinghouse, and ensure that the subrecipient takes timely and appropriate corrective action on all findings.Cause:UL Lafayette management indicated that it was working on internal procedures to adequately monitor subrecipients as result of the prior-year finding. However, management has yet to finalize and apply these procedures on all active subrecipients.Effect:Failure to properly monitor subrecipients results in noncompliance with federal regulations and increases the likelihood of improper payments which may have to be returned to the federal awarding agency.Recommendation:UL Lafayette should strengthen controls to ensure the timely review of all required subrecipient audit reports in order to evaluate the impact of any findings noted in the audits and issue management decision letters, if applicable. In addition, UL Lafayette should strengthen controls to ensure risk assessments are performed and documented on all subrecipients in accordance with federal regulations.Management?s Response and Corrective Action Plan:Management did not concur with the finding, noting it did not have sufficient time in fiscal year 2022 for corrective action and provided its progress on addressing the finding (B-83).
2022-007 - Noncompliance with Subrecipient Monitoring RequirementsAward Years: 2018, 2020 - 2022Award Numbers: DUE-2044358, NA18OAR4170098, OIA-2019511, OIA-2119688Compliance Requirement: Subrecipient MonitoringRepeat Finding: Yes (Prior Year Finding No. 2021-010)See Schedule of Findings and Questioned Costs for chart/tableCondition:For the second consecutive year, UL Lafayette did not adequately monitor subrecipients of the R&D Cluster programs. In a non-statistical sample of five subawards out of a population of 49 subawards, it was noted that for four (80%) of the subrecipients evaluated UL Lafayette was unable to provide documentation that ensured each subrecipient obtained the required audit or that the audit was reviewed so that timely and appropriate action could be taken for any findings pertaining to the federal awards. Additionally, for all five (100%) of the subrecipients evaluated, UL Lafayette could not provide evidence that the required risk analyses were performed to evaluate each subrecipients? risk of noncompliance with federal regulations and the terms of the subaward.Criteria:2 CFR 200.332(b) requires pass-through entities to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.Per 2 CFR 200.332(f), pass-through entities are responsible for verifying that every subrecipient is audited as required by 2 CFR Part 200, subpart F when it is expected that the subrecipient's federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in CFR 200.501 of $750,000 or more in federal awards during the subrecipient?s fiscal year.2 CFR 200.332(d)(2) requires that pass-through entities follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies provided to the subrecipient from the pass-through entities detected through audits, on-site reviews, and written confirmation from the subrecipient.2 CFR 200.332(d)(2) and (3) require pass-through entities to issue a management decision on applicable audit findings in accordance with 2 CFR 200.521, within six months after acceptance of the subrecipient?s audit report by the Federal Audit Clearinghouse, and ensure that the subrecipient takes timely and appropriate corrective action on all findings.Cause:UL Lafayette management indicated that it was working on internal procedures to adequately monitor subrecipients as result of the prior-year finding. However, management has yet to finalize and apply these procedures on all active subrecipients.Effect:Failure to properly monitor subrecipients results in noncompliance with federal regulations and increases the likelihood of improper payments which may have to be returned to the federal awarding agency.Recommendation:UL Lafayette should strengthen controls to ensure the timely review of all required subrecipient audit reports in order to evaluate the impact of any findings noted in the audits and issue management decision letters, if applicable. In addition, UL Lafayette should strengthen controls to ensure risk assessments are performed and documented on all subrecipients in accordance with federal regulations.Management?s Response and Corrective Action Plan:Management did not concur with the finding, noting it did not have sufficient time in fiscal year 2022 for corrective action and provided its progress on addressing the finding (B-83).
Reference Number:2022-010Prior Year Finding:NoFederal Agency:U.S. Department of the TreasuryState Agency:Department of Community AffairsFederal Program:COVID-19 - Homeowner Assistance FundAssistance Listing Number:21.026Award Number and Year:HAF0019 (2021)Compliance Requirement:Subrecipient MonitoringType of FindingSignificant Deficiency in Internal Control over Compliance, Other MattersCriteria or specific requirement:Compliance ? Per 2 CFR section 200.332(a), all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward.Required information includes:i. Subrecipient name (which must match the name associated with its unique entity identifier);ii. Subrecipient's unique entity identifier;iii. Federal Award Identification Number (FAIN);iv. Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency;v. Subaward Period of Performance Start and End Date;vi. Subaward Budget Period Start and End Date;vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation;ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA);xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity;xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;xiii. Identification of whether the award is R&D; andxiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per section 200.414.2 CFR section 200.332 also states that pass-through entities must:(d) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as:1) The subrecipient's prior experience with the same or similar subawards;2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F - Audit Requirements of this part, and the extent to which the same or similar subaward has been audited as a major program;3) Whether the subrecipient has new personnel or new or substantially changed systems;4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency).(e) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include:(1) Reviewing financial and performance reports required by the pass-through entity.(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means.(3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521 Management decision.(f) Verify that every subrecipient is audited as required by Subpart F - Audit Requirements of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in ? 200.501 Audit requirements.Control ? Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Condition:The Department of Community Affairs (Department) did not comply with subrecipient monitoring requirements for the program.Context:The Department issued one subaward under the program and it was noted that the subaward did not include all required Federal Award information, nor did the Department perform a risk assessment of the subrecipient or perform monitoring activities for the award.Questioned costs:None noted.Cause:The Department?s procedures and controls were not effective to ensure the subaward was issued in compliance with Federal requirements, nor that it performed a risk assessment or timely monitoring of subrecipient.Effect:Excluding the required federal grant award information at the time of the subaward may cause subrecipients and their auditors to be uninformed about specific program and other regulations that apply to the funds they receive. There is also the potential for subrecipients to have incomplete Schedules of Expenditures of Federal Awards (SEFA) in their Single Audit reports, and federal funds may not be properly audited at the subrecipient level in accordance with the Uniform Guidance.Not conducting during the award monitoring may result in a failure of the Division to detect that its subrecipients used subawards for unauthorized purposes, managed them in violation of the terms and conditions of the subawards, or that subaward performance goals were not achieved.Without ensuring subrecipients have obtained audits as required by Subpart F, there is an increased risk that subrecipients could be inappropriately spending and/or inaccurately tracking and reporting federal funds over multiple year periods, and these discrepancies may not be properly monitored, detected, and corrected by Division personnel on a timely basis.Recommendation:The Department should review and enhance internal controls and procedures to ensure that all required information is included in all subawards, that proper subrecipient monitoring is conducted, and that evaluation of independent audits is performed.Views of responsible officials:As recommended, the Department of Community Affairs (DCA) will review current procedures to ensure that all subaward information required by the federal Uniform Guidance is included in all subaward contracts and grant agreements. The DCA has also reviewed its current subrecipient monitoring procedures for standard subawards made by the agency and has determined that no internal control enhancements are required. The HAF award was a unique grant relationship for DCA in that the entire award was passed through to another New Jersey State government agency that is a direct affiliate of the Department. Monitoring procedures were determined based on the close working relationship with our affiliate organization and the fact that less than 1 percent of the grant award was expended through June 30, 2022. Current procedures included a risk assessment of the subrecipient and performance of the single audit desk review of the independent audit report. In addition, the Director of Audit, and the Executive Director of the subgrantee affiliate participate in weekly meetings where updates on the program status can be determined. DCA?s subrecipient monitoring plan also includes the hiring of an Integrity Monitor to oversee and monitor the use of the HAF funds as well as compliance with all HAF program reporting requirements. As program disbursement activity is continuing to increase with the HAF program(s) created more fully up and running, DCA is currently targeting the Integrity Monitor hire to take place sometime within the next three to six months.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021; W912L2-22-2-1000, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Defense Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $125,288 Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows: • $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms. • $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form. Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created. Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Department should: 1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program. 2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program. 3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings number and name: 12.401 National Guard Military Operations and Maintenance (O&M) Projects Award numbers and years: W912L2-21-2-1000, October 1, 2020 through September 30, 2021; W912L2-22-2-1000, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Defense Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $125,288 Condition—Contrary to federal regulations and its policies, the Department of Emergency Military Affairs (Department) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Department had not retained the personnel action forms supporting and approving employees’ pay rates and authorizing them to work on the program for 4 of 21 employees we tested, as follows: • $123,968 for 3 employees’ annual payroll costs and employee-related expenses for which each employee’s salaries and wages and authorization to work on the program were not supported by documented personnel action forms. • $1,320 for 1 employee whose previous personnel action form authorized their working on the program but whose most recent pay rate increase was not supported by a documented personnel action form. Effect—The Department’s failure to retain documentation supporting payroll costs could potentially result in the Department being required to return monies spent on unallowable costs to the federal agency or adjust its program’s costs so that monies are spent for allowable costs.1 During fiscal year 2022, the Department paid 323 employees $15,486,984 of salaries and wages, including employee-related expenses, that were charged to the program. There is a risk that the Department could have potentially charged additional payroll costs to the program without maintaining the required supporting documentation. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department’s Administrative Services Office (Office) was not adequately trained to follow the documentation and record retention policy. Specifically, the Office reported that it did not retain the personnel action records as they were unaware that all employee personnel records were required to be retained for 5 years after an employee’s termination. Instead, the Office interpreted the policy to only require these documents to be retained for 5 years after the documents were originally created. Criteria—The Department’s record retention policies require its Administrative Services Office to retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments.2 Federal regulation requires the Department to retain all records related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). Also, federal regulation requires the Department to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed and are supported by policies and internal controls to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430[i][1][i]). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Department should: 1. Ensure documentation is retained for all personnel actions to demonstrate employees’ salaries and wages, including employee-related expenses, are authorized to be charged to the program. 2. Review all employee personnel files for employees currently paid under the program to ensure the required documentation has been retained. If the documentation has not been retained, program management should review the employees’ activities to ensure they are allowable under the program and prepare and retain the required documentation. Further, if employee activities are determined to be unallowable, coordinate with the U.S. Department of Defense to adjust future federal reimbursement requests or repay any unallowable costs the Department charged to the program. 3. Train its Administrative Services Office and Department employees who are responsible for administering federal programs on the documentation and record retention requirements for payroll costs charged to federal programs. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 Arizona Department of Emergency Military Affairs (DEMA), State Human Resources Administration. (2007, October). DEMA Directive 20.1, section 1.3. Retrieved 9/13/2023 from https://dema.az.gov/sites/default/files/2023-08/20.1_State_Human_Resources_Administration_20071001.pdf.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program 14.231 COVID-19—Emergency Solutions Grant Program Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022 E-21-DC-04-001, July 1, 2021 through September 9, 2023 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $1,425 Assistance Listings number and name: 14.267 Continuum of Care Program Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021; AZ0118L9T002008, February 1, 2021 through January 31, 2022; AZ0011L9T002013, May 1, 2021 through April 30, 2022; AZ0173L9T002004, July 1, 2021 through June 30, 2022; AZ0009L9T002013, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $46,352 Compliance requirement: Subrecipient monitoring Total questioned costs: $47,777 Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for: • $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES) • $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES) • $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH) • $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH) Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES) The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively. Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1 Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed. As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Departments should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES) 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES) 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH) 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES) 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES) 6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES) 7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES) The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program 14.231 COVID-19—Emergency Solutions Grant Program Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022 E-21-DC-04-001, July 1, 2021 through September 9, 2023 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $1,425 Assistance Listings number and name: 14.267 Continuum of Care Program Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021; AZ0118L9T002008, February 1, 2021 through January 31, 2022; AZ0011L9T002013, May 1, 2021 through April 30, 2022; AZ0173L9T002004, July 1, 2021 through June 30, 2022; AZ0009L9T002013, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $46,352 Compliance requirement: Subrecipient monitoring Total questioned costs: $47,777 Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for: • $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES) • $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES) • $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH) • $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH) Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES) The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively. Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1 Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed. As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Departments should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES) 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES) 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH) 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES) 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES) 6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES) 7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES) The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program 14.231 COVID-19—Emergency Solutions Grant Program Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022 E-21-DC-04-001, July 1, 2021 through September 9, 2023 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $1,425 Assistance Listings number and name: 14.267 Continuum of Care Program Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021; AZ0118L9T002008, February 1, 2021 through January 31, 2022; AZ0011L9T002013, May 1, 2021 through April 30, 2022; AZ0173L9T002004, July 1, 2021 through June 30, 2022; AZ0009L9T002013, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $46,352 Compliance requirement: Subrecipient monitoring Total questioned costs: $47,777 Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for: • $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES) • $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES) • $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH) • $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH) Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES) The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively. Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1 Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed. As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Departments should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES) 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES) 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH) 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES) 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES) 6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES) 7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES) The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings numbers and names: 14.231 Emergency Solutions Grant Program 14.231 COVID-19—Emergency Solutions Grant Program Award numbers and years: E-20-DW-04-001, July 1, 2020 through September 9, 2022 E-21-DC-04-001, July 1, 2021 through September 9, 2023 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $1,425 Assistance Listings number and name: 14.267 Continuum of Care Program Award numbers and years: AZ0009L9T001912, October 1, 2020 through September 30, 2021; AZ0118L9T002008, February 1, 2021 through January 31, 2022; AZ0011L9T002013, May 1, 2021 through April 30, 2022; AZ0173L9T002004, July 1, 2021 through June 30, 2022; AZ0009L9T002013, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Housing and Urban Development Questioned costs: $46,352 Compliance requirement: Subrecipient monitoring Total questioned costs: $47,777 Condition—Contrary to federal regulations and its federal award terms, the Department of Housing (ADOH) and Department of Economic Security (DES) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $47,777 during fiscal year 2022 that were unsupported, unallowable, and/or paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 51 reimbursements that included Continuum of Care Program and Emergency Solutions Grant Program costs totaling $446,695 and $10,692 for the year, respectively, and found that the departments reimbursed the subrecipient for: • $35,562 for financial and accounting services, travel, and supplies that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to both departments as required by federal laws. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, neither department verified that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. (ADOH and DES) • $7,274 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the departments reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the departments as required by federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the departments did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the programs’ requirements. (ADOH and DES) • $4,365 for repairs and maintenance, travel, and supplies that were paid to another principal officer who performed various handyman services, including plumbing, painting, and building repairs, that were not adequately supported by a contract having specified price rates for the services and terms; therefore, we were unable to verify if the amounts reimbursed by ADOH were appropriate. Further, ADOH reimbursed the principal officer, whose services were not disclosed as a conflict of interest to ADOH as required by its contract with the subrecipient and federal regulations. (ADOH) • $576 for incentive payments to the subrecipient’s executive director without documentation demonstrating it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by ADOH were allowable. (ADOH) Additionally, contrary to federal regulations, the departments had not ensured that the subrecipient implemented competitive purchasing procedures when procuring the professional services and handyman services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. (ADOH and DES) The Continuum of Care and the Emergency Solutions Grant Programs were not audited as major federal programs for the State’s fiscal year 2022 single audit; therefore, the scope of our review was not sufficient to determine whether the departments or their subrecipients complied with all applicable federal requirements for these programs. During the audit, we became aware of the potentially noncompliant 51 reimbursements involving 1 of the departments’ nonprofit subrecipients with which they partner to carry out federal and State programs, including the Continuum of Care Program, the Emergency Solutions Grants Program, and Temporary Assistance to Needy Families (TANF), which was audited as a major federal program for fiscal year 2022, as well as the State Housing Trust Fund. Our review of select reimbursements to this subrecipient resulted in similar findings for the TANF federal program and the State Housing Trust Fund that are described in items 2022-114 and 2022-05, respectively. Effect—The departments’ lack of required monitoring increased the risk that the monies it awarded to 1 nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the departments’ reimbursing the subrecipient for $47,777 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose of providing housing assistance to those in need. Consequently, the departments may be required to return these monies to the federal agencies in accordance with federal requirements.1 Cause—ADOH had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. Also, ADOH had not properly assessed this subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, ADOH was unaware that the subrecipient had not informed it of principal officers’ conflicts of interest so that ADOH could ensure that those principal officers or their immediate family member were not involved in decision-making related to those conflicts and selectively reviewed the related costs and activities for compliance purposes. Further, ADOH personnel responsible for reviewing and approving the subrecipient’s reimbursement requests reported to us that they were trained to not follow its policies and procedures but, instead, to approve any costs that had been previously reimbursed. As reported in finding 2022-114, although the DES subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, DES had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, DES had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Departments to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Departments may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Departments’ subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Departments any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Departments should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions in accordance with its subaward contract. (ADOH and DES) 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. (ADOH and DES) 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. (ADOH) 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. (ADOH and DES) 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Departments any potential conflicts of interest. The Departments may need to provide training and technical assistance to subrecipients that addresses these compliance areas, including the Departments’ obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. (ADOH and DES) 6. Continue to work with the nonprofit subrecipient to resolve the $47,777 in unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. (ADOH and DES) 7. Work with the federal agencies to resolve the $47,777 of unallowable costs that it reimbursed, which may involve returning monies to the agencies. (ADOH and DES) The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 24 CFR §578.95 and 45 CFR §75.112.
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings number and name: 21.027 COVID-19 State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirement: Eligibility Questioned costs: $10,000 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Employment and Rehabilitation Services (Division) made benefits payments totaling $10,000 to individuals for the State’s Return-to-Work Bonus Program for which it lacked documentation to support that it paid only those individuals who were eligible to receive them. We tested 67 individuals who received benefit payments and found that the Division made benefit payments to 5 individuals totaling $10,000 for which it lacked documentation to support the eligibility determinations.1 This calculates to a 7.5 percent exception rate for our 67 individual eligibility sample, totaling $133,000. Effect—The Division’s payment of $10,000 of program benefits for which it lacked documentation showing the 5 individuals were eligible beneficiaries increases the risk that the Division may not have been able to effectively prevent or detect fraud. Consequently, the Division may be required to return $10,000 to the federal agency.2 Cause—The Division’s management reported that it contracted with a third party to implement and use a new, temporary benefits system for the State’s Return-to-Work Bonus Program from July 1, 2021, through December 31, 2021.1 When the program and the Department’s contract with the third party ended, the Division did not ensure that the third-party contractor provided it with a complete set of program documentation that was derived from the system. Criteria—Federal regulations require the Division to retain all federal program records for a period of 3 years from the submission date of the final expenditure report to the federal agency (2 CFR §200.334). In addition, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—This program ended on December 31, 2021, and the Division’s management reported to us that it received all the records related to the federal program from the third-party contractor when operations of the State’s Return-to-Work Bonus Program and related benefits system ceased.1 However, to the extent possible for this program and for all future federal programs the Division administers, the Division should: 1. Ensure subaward entities provide all records and the Division retains all records relating to a federal award for a period of 3 years from the date it submits the final expenditure report. 2. Work with the State of Arizona Office of the Governor and U.S. Department of the Treasury to resolve the $10,000 in questioned costs.2 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 To be eligible for the State’s Return-to-Work Bonus Program benefits, individuals had to have filed, received, and been deemed eligible for Unemployment Insurance program benefits in Arizona between the period of May 8, 2021, and May 15, 2021. The benefit payments consisted of bonus payments of either $1,000 or $2,000, with a total maximum benefit amount of $2,000 per eligible individual. The State’s Return-to-Work Bonus Program was funded by the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security operated the program from July 1, 2021, through December 31, 2021, and the program ended on December 31, 2021. (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-070121-02). 2 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Office of the Governor, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families 93.558 COVID-19 Temporary Assistance for Needy Families Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021; 2201AZTANF, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Subrecipient monitoring Questioned costs: $6,754 Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for: • $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. • $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. • $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable. Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively. Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1 Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract. 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. 6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. 7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families 93.558 COVID-19 Temporary Assistance for Needy Families Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021; 2201AZTANF, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Subrecipient monitoring Questioned costs: $6,754 Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for: • $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. • $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. • $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable. Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively. Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1 Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract. 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. 6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. 7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.558 Temporary Assistance for Needy Families 93.558 COVID-19 Temporary Assistance for Needy Families Award numbers and years: 2101AZTANF, October 1, 2020 through September 30, 2021; 2201AZTANF, October 1, 2021 through September 30, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Subrecipient monitoring Questioned costs: $6,754 Condition—Contrary to federal regulations and its federal award terms, the Department of Economic Security—Division of Community Assistance and Development (Division) reimbursed 1 nonprofit organization subrecipient for federal program costs totaling $6,754 during fiscal year 2022 that were unsupported, unallowable, and/or paid to 1 of the nonprofit organization’s principal officers or their immediate family member in violation of conflict-of-interest disclosure requirements. Specifically, we reviewed 12 reimbursements that included Temporary Assistance for Needy Family program costs totaling $72,800 for the year and found that the Division reimbursed the subrecipient for: • $4,973 for financial and accounting services that were paid to 1 of the nonprofit organization’s principal officers, who served as the Treasurer, and their company, which was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. We noted that the allocation method used may have resulted in multiple programs being overbilled for these services by up to $5,087. • $1,474 for bookkeeping services that were not adequately supported by sufficiently detailed invoices and a signed, written contract having a specified price rate for the services and terms; therefore, we were unable to verify if the amounts paid were appropriate. Further, the Division reimbursed the Treasurer’s family member, whose bookkeeping services company was not disclosed as a conflict of interest to the Division as required by the Division’s contract with the subrecipient and federal regulations. Also, the subrecipient allocated these costs to other federal programs and nonfederal activities; however, the Division did not verify that the allocation method the subrecipient used was reasonable or that the costs, as allocated, were allowed by the program’s requirements. • $307 for incentive payments to the subrecipient’s Executive Director without documentation to support that it was authorized by an agreement, reasonable for the services performed as provided in the subrecipient’s policies, and consistent with compensation paid for similar work in other activities; therefore, we were unable to verify if the amounts reimbursed by the Division were allowable. Additionally, contrary to federal regulations, the Division had not ensured that the subrecipient implemented its competitive purchasing procedures when procuring the professional services described above, and the subrecipient was unable to provide documentation that it had competitively procured the services. The Temporary Assistance for Needy Family program was audited as a major federal program for the State’s fiscal year 2022 single audit. During the audit, we became aware of the potentially noncompliant 12 reimbursements involving 1 of the Division’s nonprofit subrecipients with which it partners to carry out federal programs, including the Emergency Solutions Grants Program, which was not audited as a major federal program for the State’s fiscal year 2022 single audit. Our review of select reimbursements to this subrecipient resulted in similar findings for the Emergency Solutions Grants Program, Continuum of Care Program, and the State Housing Trust Fund that are described in items 2022 115 and 2022-05, respectively. Effect—The Division’s lack of required monitoring increased the risk that the monies it awarded to a nonprofit organization may not have been spent in accordance with the award terms and program requirements. Further, the Division’s reimbursing the subrecipient for $6,754 of unallowable or unsupported costs and/or costs paid to the nonprofit organization’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements resulted in those monies being unavailable to be spent for their intended purpose to provide housing assistance to individuals in need. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.1 Cause—Although the Division’s subrecipient-monitoring policies and procedures did not require it to obtain from subrecipients documentation supporting charges for personal and contracted professional services to verify allowability when subrecipients requested reimbursement, the policies and procedures required an on-site monitoring visit once every 3 years for each subrecipient in which it reviews a sample of the subrecipient’s personal and professional services charges. However, the Division had not performed an on-site monitoring visit of the nonprofit subrecipient since 2018 because it had not yet resumed all its subrecipient-monitoring activities, such as conducting on-site reviews and providing training and technical assistance, since suspending these activities during the COVID-19 pandemic during fiscal year 2020. In addition, the Division had not properly assessed the subrecipient’s risk of noncompliance with its award contract and program requirements to determine the level of monitoring procedures or training the subrecipient needed. For example, the Division was unaware that the subrecipient had not informed it of a principal officer’s conflicts of interest so that the Division could ensure that the principal officer or their immediate family member were not involved in decision-making related to those conflicts and selectively review the related costs and activities for compliance purposes. Criteria—Federal regulations require the Division to monitor subrecipients and include required procedures for assessing the risk of each subrecipient’s noncompliance and implementing appropriate monitoring procedures to address those risk assessments; verifying single audits were conducted timely, if required; reviewing financial and performance reports; following up on and ensuring corrective action is taken on deficiencies that could potentially affect the program; and issuing management decisions on the results of audit findings or monitoring (2 CFR §§200.332, .339, and .521). Federal regulations provide that monitoring procedures the Division may implement to address a subrecipient’s risk assessment include providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs (2 CFR §200.332[e]). Further, federal regulations require the Division’s subrecipients to allocate allowable costs using a reasonable basis, to use competitive purchasing standards when procuring goods and services, and to disclose in writing to the Division any potential conflicts of interest.2 Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Immediately stop reimbursing the nonprofit subrecipient for costs that are unsupported, unallowable, and/or paid to the nonprofit subrecipient’s principal officer or their immediate family member in violation of conflict-of-interest disclosure requirements without obtaining documentation to support they comply with the program’s requirements and take appropriate enforcement actions with the subrecipient in accordance with its contract. 2. Update its written policies and procedures for reviewing and approving subrecipient reimbursement requests to include a process to ensure costs are adequately supported and allowable in accordance with program requirements. 3. Train personnel responsible for reviewing and approving subrecipient reimbursement requests on how to identify costs that are unallowable under federal regulations. 4. Assess the risk of each subrecipient’s noncompliance and perform the appropriate monitoring procedures based on the assessed risk, such as providing training or technical assistance on program-related matters and performing on-site reviews and selective audits of reimbursed costs for allowability. 5. Ensure subrecipients allocate allowable costs using a reasonable basis, use competitive purchasing standards when procuring goods and services, and disclose in writing to the Division any potential conflicts of interest. The Division may need to provide training and technical assistance to subrecipients that address these compliance areas, including the Division’s obtaining conflict-of-interest disclosures from subrecipients as part of the subaward contract, as an example, or otherwise establishing a communication mechanism for subrecipients to use as such conflicts arise. 6. Continue to work with the nonprofit subrecipient to resolve the $6,754 of unallowable costs, including recovering these monies from the subrecipient and assessing the continued need to use this subrecipient for services. 7. Work with the federal agency to resolve the $6,754 of unallowable costs that it reimbursed, which may involve returning monies to the federal agency. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 The applicable federal requirements related to allowable costs, competitive purchasing, and conflicts of interest can be found in the Code of Federal Regulations at 2 CFR §§200.112, .318-.327, and Subpart E, and 45 CFR §75.112.
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance 93.568 COVID-19 Low-Income Home Energy Assistance Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020; 2101AZLIEA and 2101AZE5C6, 2021; 2201AZLIEA and 2101AZLIE4, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Earmarking Questioned costs: $211,916 Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916. Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1 Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation. Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs. 2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation. 3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies. 4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance 93.568 COVID-19 Low-Income Home Energy Assistance Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020; 2101AZLIEA and 2101AZE5C6, 2021; 2201AZLIEA and 2101AZLIE4, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Earmarking Questioned costs: $211,916 Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916. Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1 Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation. Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs. 2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation. 3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies. 4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance 93.568 COVID-19 Low-Income Home Energy Assistance Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020; 2101AZLIEA and 2101AZE5C6, 2021; 2201AZLIEA and 2101AZLIE4, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Earmarking Questioned costs: $211,916 Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916. Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1 Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation. Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs. 2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation. 3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies. 4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
Assistance Listings numbers and names: 93.568 Low-Income Home Energy Assistance 93.568 COVID-19 Low-Income Home Energy Assistance Award numbers and years: 2001AZLIEA and 2001AZE5C3, 2020; 2101AZLIEA and 2101AZE5C6, 2021; 2201AZLIEA and 2101AZLIE4, 2022 Federal agency: U.S. Department of Health and Human Services Compliance requirement: Earmarking Questioned costs: $211,916 Condition—Contrary to federal law, the Department of Economic Security—Division of Aging and Adult Services (Division), failed to limit its spending for weatherization and exceeded the 15 percent maximum weatherization earmarking threshold of $4,288,749. Specifically, for one of its awards (2001AZLIEA), the Division spent $4,500,665 for low-cost residential weatherization and other energy-related home repairs, exceeding the program’s 15 percent maximum weatherization earmarking threshold by $211,916. Effect—The Division’s exceeding the maximum weatherization earmarking threshold resulted in less monies being available for the program’s other intended purposes, such as to assist low-income households to meet their home heating and cooling energy costs and reduce their vulnerability resulting from energy needs. In addition, the Division faces an increased risk that the U.S. Department of Health and Human Services (US DHHS) may require it to repay the misspent monies in accordance with Uniform Guidance requirements.1 Cause—The Division reported that newer staff involved in the program’s administration did not consider the limitation on weatherization expenditures when reviewing the final 2 expenditures before charging them to the 2020 award. In addition, the Division did not enable a feature in the State’s accounting system that could have alerted the Division that the award’s expenditures were approaching the limitation to help ensure it would not exceed the program’s weatherization limitation. Criteria—Federal law requires the Division to limit its program spending for low-cost residential weatherization or other energy-related home repairs to no more than 15 percent of its total program expenditures each fiscal year (42 USC §8624[k]). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Spend no more than the maximum 15 percent of program monies for weatherization or other energy-related home repairs. 2. Train newer staff administrating the program on the program’s weatherization limitation and on the Division’s policies and procedures to review and approve expenditures considering this limitation. 3. Enable the feature in the State’s accounting system to alert the Division of an award’s expenditures approaching the limitation to help ensure the Division does not exceed the weatherization limitation when spending program monies. 4. Work with U.S. DHHS to resolve the $211,916 the Division overspent for weatherization or other energy-related home repairs, which may involve returning monies to the federal agency.1 The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires the federal awarding agencies’ management decision to clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521).
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($59,868,648) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2022-031: Inadequate Review of Subrecipient Single Audit Reports Type of Finding: Material noncompliance and material weakness Condition Found: IDOA did not adequately document review over single audit reports received from its subrecipients for the Aging Cluster program on a timely basis. The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of the State's Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submitted their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. IDOA staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards (SEFA) reconcile to IDOA records and (2) issuing management decisions on findings reported within required time frames. During our testing of a sample of single audit desk review files for four subrecipients (with expenditures of $36,828,349 in the fiscal year), we noted IDOA did not document the reconciliation of the subrecipient SEFAs to IDOA records within the GATA Audit Report Review Management System (ARRMS) and did not issue management decision letters to each subrecipient as of the date of our testing (June 2023). IDOA's subrecipient expenditures under the Aging Cluster program for the year ended June 30, 2022 were $58,503,162. Criteria or Requirement According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with IDOA officials, they stated the area agency on aging (AAA) audit reviews are completed, however resolution of the reconciliation items and management decisions letters were not completed timely due to a lack of staffing. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations and the grant agreement. Repeat Finding: A similar finding was reported in the 2019 Single Audit as finding number 2019-039. (Finding Code 2022- 031) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, IDOA should ensure procedures will permit issuance of management decisions within required timeframes. Views of IDOA Officials: Aging has posted and scheduled interviews for the vacant position that will oversee this process.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($59,868,648) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2022-031: Inadequate Review of Subrecipient Single Audit Reports Type of Finding: Material noncompliance and material weakness Condition Found: IDOA did not adequately document review over single audit reports received from its subrecipients for the Aging Cluster program on a timely basis. The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of the State's Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submitted their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. IDOA staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards (SEFA) reconcile to IDOA records and (2) issuing management decisions on findings reported within required time frames. During our testing of a sample of single audit desk review files for four subrecipients (with expenditures of $36,828,349 in the fiscal year), we noted IDOA did not document the reconciliation of the subrecipient SEFAs to IDOA records within the GATA Audit Report Review Management System (ARRMS) and did not issue management decision letters to each subrecipient as of the date of our testing (June 2023). IDOA's subrecipient expenditures under the Aging Cluster program for the year ended June 30, 2022 were $58,503,162. Criteria or Requirement According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with IDOA officials, they stated the area agency on aging (AAA) audit reviews are completed, however resolution of the reconciliation items and management decisions letters were not completed timely due to a lack of staffing. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations and the grant agreement. Repeat Finding: A similar finding was reported in the 2019 Single Audit as finding number 2019-039. (Finding Code 2022- 031) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, IDOA should ensure procedures will permit issuance of management decisions within required timeframes. Views of IDOA Officials: Aging has posted and scheduled interviews for the vacant position that will oversee this process.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($59,868,648) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2022-031: Inadequate Review of Subrecipient Single Audit Reports Type of Finding: Material noncompliance and material weakness Condition Found: IDOA did not adequately document review over single audit reports received from its subrecipients for the Aging Cluster program on a timely basis. The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of the State's Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submitted their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. IDOA staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards (SEFA) reconcile to IDOA records and (2) issuing management decisions on findings reported within required time frames. During our testing of a sample of single audit desk review files for four subrecipients (with expenditures of $36,828,349 in the fiscal year), we noted IDOA did not document the reconciliation of the subrecipient SEFAs to IDOA records within the GATA Audit Report Review Management System (ARRMS) and did not issue management decision letters to each subrecipient as of the date of our testing (June 2023). IDOA's subrecipient expenditures under the Aging Cluster program for the year ended June 30, 2022 were $58,503,162. Criteria or Requirement According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with IDOA officials, they stated the area agency on aging (AAA) audit reviews are completed, however resolution of the reconciliation items and management decisions letters were not completed timely due to a lack of staffing. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations and the grant agreement. Repeat Finding: A similar finding was reported in the 2019 Single Audit as finding number 2019-039. (Finding Code 2022- 031) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, IDOA should ensure procedures will permit issuance of management decisions within required timeframes. Views of IDOA Officials: Aging has posted and scheduled interviews for the vacant position that will oversee this process.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($59,868,648) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2022-031: Inadequate Review of Subrecipient Single Audit Reports Type of Finding: Material noncompliance and material weakness Condition Found: IDOA did not adequately document review over single audit reports received from its subrecipients for the Aging Cluster program on a timely basis. The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of the State's Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submitted their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. IDOA staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards (SEFA) reconcile to IDOA records and (2) issuing management decisions on findings reported within required time frames. During our testing of a sample of single audit desk review files for four subrecipients (with expenditures of $36,828,349 in the fiscal year), we noted IDOA did not document the reconciliation of the subrecipient SEFAs to IDOA records within the GATA Audit Report Review Management System (ARRMS) and did not issue management decision letters to each subrecipient as of the date of our testing (June 2023). IDOA's subrecipient expenditures under the Aging Cluster program for the year ended June 30, 2022 were $58,503,162. Criteria or Requirement According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with IDOA officials, they stated the area agency on aging (AAA) audit reviews are completed, however resolution of the reconciliation items and management decisions letters were not completed timely due to a lack of staffing. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations and the grant agreement. Repeat Finding: A similar finding was reported in the 2019 Single Audit as finding number 2019-039. (Finding Code 2022- 031) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, IDOA should ensure procedures will permit issuance of management decisions within required timeframes. Views of IDOA Officials: Aging has posted and scheduled interviews for the vacant position that will oversee this process.
State Agency: Illinois Department on Aging (IDOA) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Aging Cluster ALN and Program Expenditures: 93.044/93.045/93.053 ($59,868,648) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2022-031: Inadequate Review of Subrecipient Single Audit Reports Type of Finding: Material noncompliance and material weakness Condition Found: IDOA did not adequately document review over single audit reports received from its subrecipients for the Aging Cluster program on a timely basis. The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of the State's Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submitted their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. IDOA staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards (SEFA) reconcile to IDOA records and (2) issuing management decisions on findings reported within required time frames. During our testing of a sample of single audit desk review files for four subrecipients (with expenditures of $36,828,349 in the fiscal year), we noted IDOA did not document the reconciliation of the subrecipient SEFAs to IDOA records within the GATA Audit Report Review Management System (ARRMS) and did not issue management decision letters to each subrecipient as of the date of our testing (June 2023). IDOA's subrecipient expenditures under the Aging Cluster program for the year ended June 30, 2022 were $58,503,162. Criteria or Requirement According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with IDOA officials, they stated the area agency on aging (AAA) audit reviews are completed, however resolution of the reconciliation items and management decisions letters were not completed timely due to a lack of staffing. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations and the grant agreement. Repeat Finding: A similar finding was reported in the 2019 Single Audit as finding number 2019-039. (Finding Code 2022- 031) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDOA establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, IDOA should ensure procedures will permit issuance of management decisions within required timeframes. Views of IDOA Officials: Aging has posted and scheduled interviews for the vacant position that will oversee this process.
State Agency: Illinois Department of Commerce and Economic Opportunity (DCEO) Federal Agency: U.S. Treasury Department (TREAS) Program Name: COVID-19 – Coronavirus Relief Fund ALN and Program Expenditures: 21.019 ($190,168,889) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2022-034: Inadequate Review of Subrecipient Single Audit Reports Type of Finding: Significant deficiency Condition Found: DCEO did not adequately review single audit reports received from its subrecipients for the Coronavirus Relief Fund (CRF) program on a timely basis. The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of the State's Grant Accountability and Transparency Act (GATA) on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submit their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State. DCEO staff are responsible for reviewing the reports assigned to them by GATU and determining whether: (1) federal funds reported in the schedule of expenditures of federal awards (SEFA) reconcile to DCEO records and (2) issuing management decisions on findings reported within required time frames. During our testing of a sample of single audit desk review files for one subrecipient (with expenditures of $10,180 in the fiscal year) out of 60 tested (with expenditures of $8,356,958), we noted DCEO did not issue management decision letters to the subrecipient within the required time frame. The delay in issuing this management decision was 5 days beyond the required timeframe. Further, we noted DCEO has not established controls over subrecipient single audit reviews at an adequate level of precision to ensure management decision letters are issued within required timeframes. DCEO's subrecipient expenditures under the CRF program for the year ended June 30, 2022 were $18,502,818. Amounts passed through to subrecipients by the State under the CRF program totaled $24,432,342. Criteria or Requirement: According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subaward, and that the subaward performance goals are achieved. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure Single Audit reports are reviewed in a timely manner and management decisions are issued within required timeframes. Cause: In discussing these conditions with DCEO officials, they stated the 5 day delay (which includes two weekend days and a holiday) in issuing the management decision letter was caused by human error. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in a timely manner may result in federal funds being expended for unallowable purposes and subrecipients not administering the federal programs in accordance with laws, regulations and the grant agreement. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2022-034) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCEO establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Additionally, DCEO should ensure procedures will permit issuance of management decisions within required timeframes. Views of DCEO Officials: DCEO agrees with the auditor’s recommendation. DCEO has a system and procedures in place to assist with the compliance of 2 CFR 200.332(d)(3) and 2 CFR 200.521. Unfortunately, due to human error, the automatic reminder for ensuring issuance of the MDL was missed. At the time, the position responsible for issuing MDLs was vacant and the unit supervisor was completing those responsibilities in addition to her other duties. The position responsible for issuing MDLs has since been filled (June 2023) and DCEO does not expect this issue to repeat as now there is a primary person responsible and a backup person (the supervisor).
Finding Number: 2022-002 ? Subrecipient Monitoring Evaluation of Finding: Material Weakness. Federal Program: Community Services Block Grant Federal Assistance No.: 93.569 Title: CSBG-CV Federal Grantor: U.S. Department of Health and Human Services Pass-Through Entity: State of California, Health and Human Services Agency Grant number: 20F-3684 Criteria or specified requirement: 2 CFR sections 200.332 requires that pass-through entities evaluate each subrecipients risk of noncompliance with federal awards and monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes in compliance with the conditions of the subaward; and that subaward performance goals are achieved. Condition: The Authority has procedures in place to comply with certain subrecipient monitoring requirements, however, the procedures do not include all requirements under 2 CFR sections 200.332. The Authority is required to evaluate risk, monitor the activities of the subrecipient and ensure accountability of subrecipients. The primary activity being performed is ensuring accountability of subrecipients whereby the Authority reviews reimbursement request details to ensure that the subrecipient?s expenditures are eligible under the federal program. However, the following activities are also required and are not being performed: ? Evaluate Risk?Evaluate each subrecipient?s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: o The subrecipient?s prior experience with the same or similar subawards; o The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with 2 CFR part 200, subpart F, and the extent to which the same or similar subaward has been audited as a major program; o Whether the subrecipient has new personnel or new or substantially changed systems; and o The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). ? Monitor?Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: o Reviewing financial and programmatic (performance and special reports) required by the PTE. o Following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, onsite reviews, and other means. o Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. In addition, in 2022 the Authority underwent a desk review by the State of California, Health and Human Services Agency who found that the Authority did not conduct onsite monitoring reviews of subrecipients for fiscal year 2021-22. While the deviation from the policy was due to the COVID-19 pandemic, the policy still required site visits and the COVID-19 restrictions were lifted prior to the end of the fiscal year. Cause: Not all of the requirements for subrecipient monitoring were known to the Authority, therefore some of the procedures were not built into their policy and therefore, were not performed. In person monitoring was paused during the COVID-19 pandemic and did not begin again once the restrictions were lifted. Effect: The subrecipients were not sufficiently monitored as required under Uniform Guidance. Questioned Costs: None Context: The Authority?s policy did not include all of the required monitoring activities resulting in a systemic deficiency in subrecipient monitoring. Recommendation: We recommends that the Authority update its policy to include all subrecipient monitoring activities and consider including alternative procedures for onsite reviews when in person monitoring cannot take place.