Finding 1093416 (2024-005)

Federal Agency: United States Department of Health and Human Services Federal Program: Child Support Services (93.563) Federal Award Numbers: 1901NYCEST, 2001NYCEST, 2101NYCSES, 2201NYCEST, 2301NYCSES, 2401NYSCSS, G1604NYCEST, and 2301NYCSES Federal Award Years: 2019, 2020, 2021, 2022, 2023, and 2024 State Agency: Office of Temporary and Disability Assistance Reference: 2024-005 Criteria Matching - Maintenance of Effort Title 45 U.S. Code of Federal Regulations Part 75 (45 CFR 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.306(b) requires for all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the nonfederal entity’s cost sharing or matching when such contributions meet all of the following criteria: 8. Are verifiable from the nonfederal entity’s records; 9. Are not included as contributions for any other Federal award; 10. Are necessary and reasonable for accomplishment of project or program objectives; 11. Are allowable under subpart E of 45 CFR 75; 12. Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements of other Federal programs; 13. Are provided for in the approved budget when required by the HHS awarding agency; and 14. Conform to other provisions of this part, as applicable. Subrecipient Monitoring Additionally, 45 CFR 75.32(d) states all pass-through entities must monitor the activities of the subrecipient as necessary to ensure that the subaward issued 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. Further, 45 CFR 75.203(c) requires the nonfederal entity to evaluate and monitor the nonfederal entity’s compliance with statutes, regulations and the terms of the Federal awards. The nonfederal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the federal award (45 CF 75.400(b)). Each state must expend and account for the federal award in accordance with state laws and procedures for expending the state’s own funds. Such monitoring activities should ensure that the expended funds were for allowable costs in accordance with federal regulations. Also, 45 CFR 75.352(e) states, depending upon the pass-through entity’s assessment of risk posed by the subrecipient, the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: 1. Providing subrecipients with training and technical assistance on program-related matters; 2. Performing on-site reviews of the subrecipient’s program operations; and 3. Arranging for agreed-upon procedures engagements as described in 45 CFR 75.425. Internal controls Lastly, 45 CFR 75.303(a) states the 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. Condition The Office of Temporary and Disability Assistance (the Office) enters into grant agreements with local districts to provide programmatic services for the Child Support Enforcement program. Local districts initially cover 100% of costs incurred under the grant and periodically submit requests for reimbursement to the State of New York for services rendered. The Office reimburses local districts only for the federal share of the costs incurred, while the local districts provide the matching funds required by the State of New York. During the fiscal year ended March 31, 2024, the Office relied upon the local districts’ match rate of 34% to ensure the State met their matching requirements of the Child Support Services program. During our testwork over the Office’s subrecipient monitoring process, we noted that the Office does not have a process or internal controls in place to verify the sources of funds used by local districts to meet the matching requirements of the federal program awards, ensuring that these sources are allowable under federal regulations. Cause The condition caused is due to a lack of policies and procedures to ensure that funds utilized by the local districts for cost sharing or matching purposes are in accordance with 45 CFR 75.306(b) The Office’s subrecipient monitoring procedures implemented in November 2020 do not include a review of the local funds used for cost sharing or matching purposes. Possible Asserted Effect Failure to review the sources of the funds used by local districts for matching could result in the use of inappropriate funds for cost sharing or matching of expenditures. This noncompliance with the program laws, regulations, and terms and conditions of Federal awards could lead to questioned costs and potential disallowance of funds by federal agencies Questioned Costs Cannot be determined. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding A similar finding was included in the 2021 Single Audit Report as finding number 2021-007 on pages 38–39. We recommend the Office and the State develop and implement policies and procedures over subrecipient monitoring which include monitoring procedures over the local districts. These policies and procedures should incorporate reviewing the source of the local district’s cost sharing or match to determine that the source is appropriate and in accordance with 45 CFR 75.306(b).