Finding Text
2025-004 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: 2024-004 Year of Finding Origination: 2022 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: 93.563 Child Support Services Award Number and Year: 2501MNSCSS and 2501MNICSS, 2025 Pass-Through Agency: Minnesota Department of Human Services and Minnesota Department of Children, Youth, and Families Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, 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 Child Support Services are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance DHS-2550 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: • One claim included activity that was allocated on an incorrect full-time equivalent (FTE) split. • One claim was paid to an incorrect vendor and the correct vendor in the same period. Both claims were included in the quarterly report. • One claim was included on the incorrect report. The items noted above are included in the State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Activities Allowed and Unallowed, Allowable Costs/Cost Principles finding (2025-001) and the Grants to States for Medicaid Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting finding (2025-005). Questioned Costs: Known questioned costs and likely questioned costs were under $25,000. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the Health and Human Services are for allowable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA are $1,083,658, consisting of 2,196 transactions. The sample of 40 transactions totaled $159,828. The sample sizes were based on 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 DHS’ ability to provide required oversight over federal programs and result in the Health and Human Services receiving either more or less federal funds than justified based on the actual underlying activity. Cause: The Health and Human Services’ 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 Health and Human Services implement controls to ensure activities allowed and allowable costs are appropriately identified and reported to DHS in accordance with federal program guidance and DHS instructions. We also recommend the Health and Human Services correct and resubmit reports submitted with costs allocated incorrectly. View of Responsible Official: Acknowledge