Finding Text
2023-004 Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Prior Year Finding Number: N/A
Year of Finding Origination: 2023
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Material Weakness and Modified Opinion
Federal Agency: U.S. Department of Health and Human Services
Program: 93.778 Medical Assistance Program
Award Number and Year: 2305MN5ADM, 2023
Pass-Through Agency: Minnesota Department of Human Services
Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Administrative program costs for Medical Assistance Program are submitted to the Minnesota Department of
Human Services (DHS) through the DHS Income Maintenance (DHS-2550) report and the Social Service Fund (DHS-2556) report on a quarterly basis. DHS provides reporting instructions including information regarding eligible and ineligible costs.
Condition: The following exceptions were noted in the sample of 40 expenditures tested for activities allowed or unallowed and allowable costs/cost principles:
• Three claims were included in the DHS-2550 and DHS-2556 reports as eligible expenditures but were not eligible for federal reimbursement.
• For eleven timesheets tested, the payroll costs were allocated on an incorrect full-time equivalent (FTE) split, as the income maintenance and social services splits had been entered into the system inversely.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the County are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs.
The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Errors in the identification and reporting of costs on the quarterly reports can impair the ability of DHS to provide required oversight over federal programs and result in the County receiving either more or less federal funds than justified based on the actual underlying activity.
Cause: The County’s controls over the identification of allowable activities and costs, preparation of the quarterly reports, and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors.
Recommendation: We recommend the County implement controls to ensure activities allowed and allowable costs are appropriately identified and accurately reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge