Mille Lacs CountyLocal Government

2024-007 Allowable Costs/Cost Principles – Cost Allocation Plan Prior Year Finding Number: N/A Year of Finding Origination: 2024 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 Programs: 93.563 Child Support Services, 93.778 Medicaid Cluster Award Number and Year: 2301MNCSES; 2024, 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. Title 2 U.S. Code of Federal Regulations § 2 CFR 200.403(a) and § 2 CFR 200.403(g) require costs to be necessary and reasonable and be adequately documented. Condition: For two of the five departments tested, incorrect expenditure amounts were used in the cost allocation plan. In addition, for one of the five departments tested, the County did not have support for the basis of allocating the costs to benefiting departments. Questioned Costs: $2,968,953, which is calculated as $1,299,253 of department costs tested within the cost allocation plan that were derived from incorrect information and $1,669,700 in department costs without a documented basis for allocating costs. Not all questioned costs were allocated to the department reporting grant expenditures or to the grant tested as a major program. Additionally, the rate of reimbursement of allocated costs to the grant is not known to the auditor. Context: The 2024 cost allocation plan is prepared using activity and expenditures from 2022. The cost allocation plan is prepared annually by a contractor and submitted to the Minnesota Department of Human Services (DHS) for reimbursement of county-wide indirect cost reimbursement. For one department, the cost allocation plan included expenditure accounts with credit balances as debit balances and, for another department, the 2023 general ledger expenditures were used rather than 2022. Furthermore, the basis for one department was determined in direct conversation between the cost allocation plan preparer and the County, with no documented support retained. Effect: Errors in reporting expenditures and the basis of the allocations used in the cost allocation plan calculation could result in incorrect county-wide indirect cost reimbursements from DHS. Cause: The cost allocation plan preparer’s work contained errors or lacked proper support, and the County did not identify the errors or lack of support. Recommendation: We recommend the County provide accurate and supported information to the cost allocation plan preparer and appropriate staff review the cost allocation plan to ensure the data, basis, and calculation are accurate, complete, and supported. View of Responsible Official: Concur

2022-007 Reporting Prior Year Finding Number: N/A Repeat Finding Since: N/A Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Federal Direct; 2022 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. The U.S. Department of the Treasury requires an annual Project and Expenditure Report submitted for Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) that include current period expenditures. The Annual Project and Expenditure Report is required to be submitted to the U.S. Treasury by April 30 of each year. Condition: The County incorrectly reported the full CSLFRF award amount of $5,089,194 as expenditures on the Annual Project and Expenditure Report submitted to the U.S. Department of the Treasury for 2022 when the amount reported should have been $1,232,368. Additionally, the 2022 Annual Project and Expenditure Report was not submitted to the U.S. Treasury by the April 30 due date. The Annual Project and Expenditure Report due in April 2022 was for the reporting period ending March 31, 2022. Questioned Costs: $3,856,826 Context: The County opted to spend the CSLFRF’s award under the Revenue Replacement category, which allows spending on broader types of government services. Effect: Noncompliance with federal reporting requirements. Cause: County staff responsible for completing and submitting the Annual Project and Expenditure Report misinterpreted the guidance and reported planned expenditures versus actual expenditures under the Revenue Replacement category. Recommendation: We recommend the County review the U.S. Department of the Treasury’s guidance and form instructions to ensure it is correctly reporting CSLFRF activity by the required deadline. View of Responsible Official: Concur

Finding Number: 2020-006 Prior Year Finding Number: N/A Repeat Finding Since: N/A Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Program: U.S. Department of the Treasury?s COVID-19 ? Coronavirus Relief Fund (CFDA No. 21.019), 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 a requirement, 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). Condition: The County reported $60,000 of payroll costs for Community and Veterans Services Fund staff. The County did not identify the employees, track the Coronavirus Relief Fund (CRF)-related duties performed, or identify the specific time spent for the reported payroll costs. Questioned Costs: $60,000 Context: The County expended a total of $3,319,088 in COVID-19 ? Coronavirus Relief Funds, and incurred other eligible expenditures which were not reported. The sample size was 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 CRF program which are not in compliance with the activities allowed or unallowed, allowable costs/cost principles, and period of performance requirements. Cause: Since the Community and Veterans Services Fund salary expenditures encompass public health staff, the County did not document duties performed or track specific time spent performing COVID-19-related duties. Recommendation: We recommend the County implement procedures to follow the guidance related to the CRF, claim the actual costs incurred, and maintain documentation to support the amounts claimed. View of Responsible Official: Concur

Finding Number: 2020-007 Prior Year Finding Number: N/A Repeat Finding Since: N/A Subrecipient Monitoring Program: U.S. Department of the Treasury?s COVID-19 ? Coronavirus Relief Fund (CFDA No. 21.019), 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. Also, the County must comply with the requirements for pass-through entities as identified in Title 2 U.S. Code of Federal Regulations ? 200.332, such as clearly identifying the award to the subrecipient; evaluating the subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the award; monitoring the activities of the subrecipient; and verifying the subrecipient is audited, if required. Condition: The County did not document risk assessment procedures performed over its subrecipients. Award information, including the CFDA number, was not provided to subrecipients and required monitoring procedures were not performed. Additionally, the County does not have documented policies and procedures for subrecipient monitoring. Questioned Costs: None. Context: The County passed funds to local governments that the County is familiar with and who have been operating for many years. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The County is not meeting federal regulations pertaining to subrecipient monitoring. Also, the County cannot be assured its subrecipients are administering federal awards in compliance with all applicable federal requirements. Cause: The County does not generally provide federal awards to subrecipients and, therefore, did not have policies and procedures in place for subrecipient monitoring activities. Additionally, the County was not aware of the full extent of requirements for subrecipient monitoring. Recommendation: We recommend the County work with departments that pass funds through to subrecipients to identify responsibilities such as completing risk assessments and monitoring procedures over federal programs, as well as creating and maintaining proper documentation to meet the requirements of federal programs. This would include documenting the monitoring procedures performed (such as on-site visits and review of the subrecipients? audit findings) and any related follow-up on findings, and performing and documenting a risk assessment of subrecipients. Additionally, we recommend the County include applicable CFDA numbers in communications regarding the program to its subrecipients. Finally, we recommend the County develop and document policies and procedures for monitoring all federal awards. View of Responsible Official: Concur

Finding Number: 2019-002 Prior Year Finding Number: N/A Repeat Finding Since: N/A Eligibility Program: U.S. Department of Health and Human Services? Medical Assistance Program (CFDA No. 93.778), Award Nos. 1905MN5ADM and 1905MN5MAP, 2019 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. Condition: The Minnesota Department of Human Services (DHS) maintains the computer systems, MAXIS and METS, which are used by the County to support the eligibility determination process. In the case files reviewed for compliance with Medical Assistance Program eligibility requirements, not all documentation was available, updated, or input correctly to support participant eligibility. The following exceptions were noted in nine of the sample of 40 MAXIS case files tested: ? One instance where income reported could not be re-determined based on the support provided in the case file. ? Seven instances where case files did not have accurate or properly supported asset information. ? Three instances where the citizenship information in the case file was not accurate or appropriately supported. Questioned Costs: Not applicable. The County administers the program, but benefits to participants in this program are paid by the State of Minnesota. Context: The State of Minnesota and the County?s Community and Veteran Services Department split the eligibility determination process. The County performs the ?intake function? (meeting with the social services client to determine income and categorical eligibility), while the state maintains MAXIS and METS, which support the eligibility determination and actually pay the benefits to the participants. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The lack of updated information in MAXIS and documented verification of key eligibility-determining factors increases the risk that clients will receive benefits when they are not eligible. Cause: Program personnel entering case information into MAXIS did not ensure all required information was input or updated in MAXIS correctly or that all required information was obtained and/or retained. Recommendation: We recommend the County implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists and is properly input or updated in MAXIS and maintained in case files, and that issues are followed up in a timely manner. In addition, consideration should be given to providing additional training to program personnel. View of Responsible Official: Concur