FINDING 2022-003 Subject: Medicaid Cluster - Reporting 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 Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion 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 (FSSA) 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 to December 31, 2019, and as such, internal controls for that period were reviewed. The Cost Report for the Medicaid Program was prepared by the Township's contracted CPA firm using information provided by the Township. The Township provided reports detailing run data, expenditures, and charges (both Medicaid and non-Medicaid) to the CPA firm. The CPA firm prepared the report and submitted it to the Indiana FSSA. The Township did not participate in the preparation or submission process, nor complete a review of the report prior to submission. As such, the Township could not ensure that the information provided was properly utilized or that the report was accurate. Additionally, for five of the seven key line items tested, the Township could not provide supporting documentation. The lack of supporting documentation for Ambulance Runs, Fire Runs, EMT Salaries, Fire Salaries, and Total Ambulance Cost on the 2019 Cost Report prevented the determination of the accuracy of these line items. The lack of internal controls and noncompliance were systemic issues 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). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. . . ." 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 the Medicaid Cluster funds were appropriately reported. 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 controls, 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. In addition, not supporting key line items increases the likelihood that information is not accurate and properly reported to FSSA and the public. 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 Cost Report for Reimbursement for the Medicaid Cluster awards. 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.