Finding 574079 (2024-001)

2024-001 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: 2023-006 Year of Finding Origination: 2023 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 Medical Assistance Program 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 federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Administrative program costs for Medical Assistance Program are submitted to the Minnesota Department of Human Services (DHS) through the DHS Income Maintenance (DHS-2550) report and the Social Service Fund (DHS-2556) 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 for activities allowed or unallowed and allowable costs/cost principles: • One claim was included in a DHS-2550 report as eligible expenditures but was not eligible for federal reimbursement. • One claim included in a DHS-2556 report was reported as a reduction of Intergovernmental Federal Revenue rather than a Services and Charges expenditure. • For eight timesheets tested, the payroll costs were allocated on an incorrect full-time equivalent (FTE) split on the DHS-2550 and DHS-2556 reports. • One timesheet was included in the DHS-2556 reports for Social Service Time Study Random Moment Time Study (SSTS RMS) Participants Payroll Expense rather than Non SSTS RMS Participants Payroll Expense. Questioned Costs: Questioned costs identified were less than $25,000. Context: DHS relies on accurate identification and reporting of program costs to ensure grant funds paid to the County are allowable and provide detailed information necessary for maintaining proper oversight over federal programs. Total expenditures reported on the SEFA is $715,942, consisting of 1,419 transactions. The sample of 40 transactions totaled $88,180. The sample sizes were based on the 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. Cause: The County’s 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. The County indicated the FTE split was updated during 2024 for non-payroll costs but not for the payroll costs. 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. We also recommend the County correct and resubmit reports submitted with unallowable activities or costs, costs allocated incorrectly, or activity reported incorrectly. View of Responsible Official: Acknowledge