Finding Text
2023-005 Reporting (DHS 2550 and 2556)
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 Heath 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 a sample of quarterly reports tested:
• In the DHS-2550 second and fourth quarter reports, salary reimbursements were reported as a reduction to income maintenance administrative overhead expenditures for “Salary and Fringe” and “Services and Charges” rather than as “Revenue Offset.” In the DHS-2556 second and fourth quarter reports, salary reimbursements were reported as reductions in payroll expenditures rather than miscellaneous revenue.
• The social services department does not have a rental agreement in place to support the rent payments included in both the DHS-2550 and DHS-2556 second and fourth quarter reports.
• In the DHS-2556 second quarter report, revenue was reported as Fees for Services rather than Intergovernmental Federal Revenue.
• In both the DHS-2550 and DHS-2556 fourth quarter reports, expenditures were reported related to remodeling areas not used exclusively for income maintenance or social service programs instead of only reporting these areas' proportionate share of costs.
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 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 preparation of the quarterly reports were not sufficient to identify the reporting errors.
Recommendation: We recommend Traverse County implement controls to ensure accurate reporting to DHS in accordance with federal program guidance and DHS instructions. We also recommend reports submitted incorrectly are corrected and resubmitted.
View of Responsible Official: Acknowledge