Finding Text
FINDING 2022-002 Subject: Medicaid Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Health and Human Services Federal Program: Medical Assistance Program Assistance Listings Number: 93.778 Federal Award Number and Year (or Other Identifying Number): FY2022 Pass-Through Entity: Indiana Family and Social Services Administration Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Condition and Context The Township had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, material noncompliance related to expenditures made from the Medicaid Cluster. The Medicaid Cluster consists of three federal programs. However, the Township received funding from only one program, the Medicaid Assistance Program. The Medicaid Assistance Program grant funding is provided by the Indiana Family and Social Services Administration to Freestanding Governmental Ambulance Providers, such as the Township, based on a Cost Report for funding. The Cost Report for funding utilizes all costs associated with the operation of the Township's ambulance program in conjunction with other metrics such as ambulance runs, total charges, and Medicaid charges to determine the federal ambulance payment adjustment, the amount received by the Township. The Township utilized its Fire Operations fund to account for both fire and ambulance services. Costs were allocated between fire and ambulance services as necessary. Expenditures related to ambulance services were included in the Township's Cost Report to determine the reimbursement due to the Township. The funding received during the audit period was based on expenditures and data from January 1, 2019 through December 31, 2019, and as such, internal controls for that period were reviewed. Expenditures related to ambulance services were included in the Township's Cost Report to determine the reimbursement due to the Township. As such, expenditures provided to the Township's CPA firm should have been reviewed for allowability prior to submission. No evidence of a review or oversight process to determine allowability was identified over the documentation submitted to the CPA firm. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls over the Medicaid Cluster expenditures was not designed by management of the Township, which would include segregation of key functions to ensure Medicaid Cluster funds were being used appropriately. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Township's management statements of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Township. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Township design and implement a proper system of internal controls that would provide segregation of duties for the preparation of the claims for expenditures of the Medicaid Cluster awards and the review of these claims prior to payment. Additionally, policies and procedures should be implemented to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.