Finding Text
2023-003 Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Prior Year Finding Number: N/A
Year of Finding Origination: 2023
Type of Finding: Internal Control Over Compliance and Compliance
Severity of Deficiency: Significant Deficiency and Other Matter
Federal Agency: U.S. Department of Health and Human Services
Program: 93.563 Child Support Enforcement
Award Number and Year: 2301MNCSES and 2301MNCEST; 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 Child Support Enforcement program 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. Payroll for certain staff is required to be allocated between the 2550 report and the DHS-2556 report. Effective internal control includes documentation of approval for claims.
Condition: The following deviations were noted in a sample of 40 expenditures tested:
• two claims did not have documentation to support the supervisor’s approval, and
• four employees’ timesheets for office support staff were not allocated correctly between income maintenance and social services and therefore the payroll expenditures included on the DHS quarterly reports were not accurate.
Questioned Costs: Questioned costs identified were less than $25,000.
Context: The documentation of the approval of the claims could not be provided for review. DHS relies on accurate submission of program costs to ensure that resulting grant funds paid to MNPrairie are for applicable federal program activities/costs.
For sampled items, the sample size was based on the guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits.
Effect: Unapproved claims could result in unallowable costs being included in the DHS quarterly reports. In addition, approximately $63,000 in payroll expenditures were reported on the DHS-2550 report which should have been reported on the DHS Social Service DHS-2556 report. The federal funding is allocated differently and at different rates for each report; it is likely the federal funds received related to these costs were inaccurate.
Cause: MNPrairie indicated the two claims were reviewed but the documentation to support this review and approval for payment was overlooked by staff completing the procedure. In addition, MNPrairie noted the office support staff employees did not have the correct payroll allocations in the payroll system in error.
Recommendation: We recommend MNPrairie maintain documentation to support the review and approval of all claims to ensure costs are allowable to be reported on the DHS-2550 report. In addition, we recommend the DHS-2550 report be completed in accordance with DHS instructions and any reports submitted with costs allocated incorrectly should be corrected and resubmitted.
View of Responsible Official: Acknowledge.