Hubbard County

2022-006 Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: 2021-003 Repeat Finding Since: 2021 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: 93.778 Medical Assistance Program Award Number and Year: 2205MN5ADM; 2022 Pass-Through Agency: Minnesota Department of Human Services (DHS) 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. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are completed in accordance with DHS reporting instructions. As part of the County’s reporting requirements for the Medical Assistance Program, the County submits the DHS Income Maintenance DHS-2550 report and the Social Services DHS-2556 report on a quarterly basis. Condition: For a portion of the year, salary and benefits for the Office Support Specialist position were allocated 30 percent to Income Maintenance costs on the DHS-2550 reports and 59 percent to Social Services costs on the DHS-2556 reports when the County's support indicated that it should have been allocated 33 percent and 53 percent, respectively. Additionally, revenues reported in the fourth quarter DHS-2556 report were understated. Questioned Costs: None Context: DHS relies on accurate reporting of program costs to ensure that resulting grant funds paid to the County are for applicable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Governmental Auditing Standards and Single Audits. Effect: Errors in the submission of costs on the quarterly reports can impair DHS’s ability to provide required oversight over federal programs and can result in the County receiving either more or less federal funds than can be justified based on the actual underlying activity. For the year, the errors identified resulted in expenditures on the DHS-2550 reports being understated approximately $4,100 and expenditures on DHS-2556 reports being overstated approximately $7,800. Revenues on the fourth quarter DHS-2556 report were understated by approximately $90,000. Cause: The expenditure allocation rates for the Office Support Specialist position were not updated in the payroll system at the beginning of the year and the support for the fourth quarter DHS-2556 revenues was generated before all receipts had been posted to the County general ledger. Recommendation: We recommend the County implement controls that ensure that the quarterly reports are completed accurately and in accordance with DHS guidance. View of Responsible Official: Acknowledge

Finding Number: 2022-006 Finding Title: Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting Program: 93.778 Medical Assistance Program Name of Contact Person Responsible for Corrective Action: Brian Ophus, Social Services Director Corrective Action Planned: Staff allocations have been re calculated per DHS guidelines in the new County Payroll system. Anticipated Completion Date: November 1, 2023

2021-003

2021-003 Activities Allowed and Unallowed, Allowable Costs/Costs Principles, and Reporting Prior Year Finding Number: N/A Repeat Finding Since: N/A 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: 93.778 Medical Assistance Program Award Number and Year: 2105MN5ADM, 2021 Pass-Through Agency: Minnesota Department of Human Services (DHS) 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. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are completed in accordance with DHS reporting instructions. As part of the County?s reporting requirements for the Medical Assistance Program, the County submits the DHS Income Maintenance DHS-2550 report and the Social Services DHS-2556 report on a quarterly basis. Condition: During the year, salary and benefits for the Office Support Specialist position were allocated 30 percent to Income Maintenance costs on the DHS-2550 reports and 59 percent to Social Services costs on the DHS-2556 reports when the County?s support indicated that it should have been allocated 33 percent and 55 percent, respectively. Questioned Costs: None. Context: DHS relies on accurate submission of program costs to ensure that resulting grant funds paid to the County are for applicable federal program activities/costs. 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 submission of costs on the quarterly reports can result in the County receiving either more or less federal funding than can be justified based on the actual underlying activity. For the year, the errors identified resulted in expenditures on the DHS-2550 reports being understated approximately $4,200 and expenditures on DHS-2556 reports being overstated approximately $5,400. Cause: The County?s controls over preparation of the quarterly reports and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend that the County implement controls that ensure the quarterly reports are completed accurately and in accordance with DHS guidance. View of Responsible Official: Acknowledge

Finding Number: 2021-003 Finding Title: Activities Allowed and Unallowed, Allowable Costs/Costs Principles, and Reporting Program: Medical Assistance Program (Assistance Listing # 93.778) Name of Contact Person Responsible for Corrective Action: Brian Ophus, Hubbard County Social Services Director Corrective Action Planned: County will implement controls that ensure that costs submitted on the quarterly reports are accurate and consistent with DHS guidance. Anticipated Completion Date: 12/31/2022

Finding Number: 2020-002 Prior Year Finding Number: N/A Repeat Finding Since: N/A Activities Allowed and Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Reporting Program: U.S. Department of the Treasury?s COVID-19 ? Coronavirus Relief Fund (CFDA No. 21.019), Award No. SLT0016, 2020 Pass-Through Agency: Minnesota Management and Budget 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. Section 5001(d) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided the eligible purposes for which COVID-19 ? Coronavirus Relief Fund payments may be used. Payments must have been used to cover costs that were necessary expenditures incurred due to the public health emergency, not accounted for in the County?s budget approved as of March 27, 2020, and incurred during the covered period. The State of Minnesota provided requirements, as the pass-through entity, that the covered period for Minnesota counties began on March 1, 2020, and ended on December 1, 2020, (period of performance). The State of Minnesota also established reporting requirements for funding passed through to local governments. Condition: In addition to the sample items tested, while summarizing the expenditures reported on the November/December Local Government Expenditure Report, the following issues were investigated and found to be deficient: ? $94,500 was paid to a vendor for the completion of an electronic imaging project. The invoice was dated December 4, 2020, and the County did not have documentation that the project was completed within the period of performance. ? $52,000 was paid to a vendor for a subscription service for electronic imaging. $47,667 of the amount paid was determined to be a prepaid expense, which was outside the period of performance. ? $10,750 was reported without supporting claim or other documentation. Questioned Costs: $152,917 related to either expenditures not within the period of performance or without supporting documentation. Context: It is likely that the County would have eligible payroll expenditures to replace questioned costs, if allowed by the pass-through entity. The results of this finding are not from a sample size based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The County identified expenditures as relating to the Coronavirus Relief Fund program which are not in compliance with activities allowed or unallowed, allowable costs/cost principles, period of performance, and reporting compliance requirements. Cause: The County indicated it was difficult to carry out the requirements of the grant due to staffing constraints during the election period. The payment for the electronic imaging system after the period of performance was due to confusion on the timing of the invoice. For the item considered prepaid, the County did not have procedures in place to ensure the expenditure was within the period of performance. Additionally, the unsupported claim resulted from the County reporting an item at the direction of Minnesota Management and Budget without maintaining documentation. Recommendation: We recommend the County implement procedures to follow the guidance related to the Coronavirus Relief Fund program and report documented and allowable costs incurred under the grant. View of Responsible Official: Acknowledged

Finding Number: 2020-002 Finding Title: Activities Allowed and Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Reporting Program: Coronavirus Relief Fund (CFDA No. 21.019) Name of Contact Person Responsible for Corrective Action: Kay Rave, Hubbard County Auditor/Treasurer Corrective Action Planned: County will submit expenditure reports and support for items purchased within the allowable grant period. Anticipated Completion Date: Expenditure reports will be submitted to auditors by November 19, 2021.

Finding Number: 2019-004 Prior Year Finding Number: N/A Repeat Finding Since: N/A Activities Allowed and Unallowed, Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services? Child Support Enforcement Program (CFDA No. 93.563), Award No. 1901MNCSES and 1901MNCEST, 2019 Pass-Through Agency: Minnesota Department of Human Services (DHS) 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. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program costs are submitted to DHS in accordance with DHS instructions. Administrative programs costs for the Child Support Enforcement program are submitted through the DHS Income Maintenance DHS-2550 report on a quarterly basis. Condition: The following errors were noted in the DHS-2550 reports submitted for 2019: ? Payroll costs for the Income Maintenance/Child Support supervisor were allocated as 20 percent Child Support costs and 80 percent Income Maintenance Overhead costs. Based on DHS instructions, 100 percent of this position's salary and benefits should have been reported as Income Maintenance Overhead. ? Salary and benefits for the office support specialist positions were allocated 40 percent to Income Maintenance costs on the DHS-2550 reports when the County's support indicated that this should have been 31 percent. ? Reimbursements paid to individuals to return overpayments received, which are not eligible costs, were incorrectly submitted as Income Maintenance Overhead costs. The items above are included in the Medical Assistance Reporting finding (2019-005). Questioned Costs: None. Context: DHS relies on accurate submission of program costs to ensure that resulting grant funds paid to the County are for applicable federal program activities/costs. Revised reports have since been submitted by the County to correct for the errors identified in the audit. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Errors in the submission of costs on the quarterly reports can result in the County receiving either more or less federal funding than can be justified based on the actual underlying activity. Approximately $17,500 in costs were reported as Direct Child Support costs on the DHS-2550 reports that should have been reported as Income Maintenance Overhead. Additionally, other costs submitted on the DHS-2550 reports as Income Maintenance Overhead were overstated approximately $12,000. Cause: The County's controls over preparation of the quarterly reports and maintenance of payroll allocations in the accounting system were not sufficient to identify these errors. Recommendation: We recommend that the County implement controls that ensure that costs submitted on the quarterly reports are accurate and consistent with DHS guidance. View of Responsible Official: Acknowledged

Finding Number: 2019-004 Finding Title: Activities Allowed and Unallowed, Allowable Costs/Cost Principles Program: Child Support Enforcement Program (CFDA No. 93.563) Name of Contact Person Responsible for Corrective Action: Brian Ophus, Social Service Director Corrective Action Planned: County will implement controls that ensure that costs submitted on the quarterly reports are accurate and consistent with DHS guidance. Anticipated Completion Date: 2020

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