Finding Text
2024-006 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: N/A Year of Finding Origination: 2024 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 Grants to States for Medicaid Award Number and Year: 2405MN5ADM; 2024 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 award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations §§ 200.403(a) and 200.403(g) require costs to be necessary and reasonable, and be adequately documented. For federal awards received from the Minnesota Department of Human Services (DHS), internal controls should be established and maintained to provide assurance that program reports submitted to DHS are completed and documented in accordance with DHS reporting instructions. As part of Wilkin County’s reporting requirements, the Public Health Department submits the Local Collaborative Time Study (LCTS) Public Health Cost Schedule DHS-3220.3 on a quarterly basis. Condition: The County did not maintain adequate support for the reported payroll amounts on LCTS Public Health Cost Schedule DHS-3220.3 reports tested. The reports also had no documentation of review. Questioned Costs: $329,183; known questioned costs were determined based on the payroll costs from each of the four LCTS Public Health Cost Schedule DHS-3220.3 reports. Context: Minnesota DHS relies on accurate submission of program costs to ensure that resulting grant funds paid to Wilkin County are for applicable federal program activities/costs. Total expenditures reported on the Schedule of Expenditures of Federal Awards are $416,193. Amounts reported on the DHS-2550, DHS-2556, and LCTS Public Health Cost Schedule DHS-3220.3 reports were $759,694, $1,879,054, and $379,254, respectively. The State of Minnesota determines the reimbursement of reported expenditures. The reporting population consisted of four quarterly DHS-2550, DHS-2556, and LCTS Public Health Cost Schedule DHS-3220.3 reports; and originally a sample of two of each report type was selected for report testing. Additionally, a sample of 40 expenditures were selected for testing, which included five LCTS Public Health Cost Schedule DHS-3220.3 expenditures for testing. Payroll reported expenditure testing relating to the LCTS Public Health Cost Schedule DHS-3220.3 was expanded to cover payroll expenditures of all four quarters.The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits, and subsequently expanded. Effect: Errors in the identification and reporting of costs on the quarterly reports can impair DHS’ ability 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 employee who prepared the reports and the supporting documentation left the County in 2025. The supporting documentation could not be located. 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, including that reports are reviewed by someone other than the preparer. We also recommend the County correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reporting incorrectly. View of Responsible Official: Concur